DroneShield Ltd (ASX: DRO) shares have given investors a pretty wild ride over the past year.
The stock is down another 2.94% to $1.65 on Friday, leaving it close to its 52-week low.
But after such a big fall, I think this is starting to look like one of the more interesting ASX turnaround stories to watch.
Here's why.
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Short sellers have piled in
The latest short-selling data showed 15.38% of DroneShield shares were sold short, making it the second most shorted stock on the ASX.
That's a huge bet against the company.
Yes, short sellers clearly have plenty to point to.
DroneShield reported a $12.4 million underlying EBITDA loss in the first-half, while its statutory loss came in at $32.2 million.
The shares also look expensive on traditional earnings measures, with profits still small compared with the company's $1.5 billion valuation.
But this is where I think things get interesting.
If DroneShield keeps delivering stronger revenue and winning new orders, some short sellers may start heading for the exits.
That could add another source of buying demand if sentiment starts turning.
Sales are still moving fast
The share price might look ugly, but the sales numbers tell a very different story.
First-half revenue jumped 74% to $125.8 million, while committed FY26 revenue recently increased to $251 million from $240 million.
That already puts DroneShield inside management's full-year revenue outlook of $250 million to $270 million.
There is also another $46 million of committed revenue sitting in FY27 and beyond.
And I think the new product pipeline is worth watching too.
DroneShield's first RfRecon order will be deployed to an existing Western European military customer before the end of the year.
I like seeing new products move from launch to customer orders this quickly because it gives the company another way to keep growing.
The balance sheet gives me another reason to stay positive, with around $180 million in cash at the end of June and no debt.
Could DroneShield shares really double?
I think they can.
A move from $1.65 to $3.30 would mean a 100% gain, which sounds huge at first glance.
But even at that price, DroneShield shares would still be more than 50% below their 52-week high.
The big thing I want to see now is more of that revenue growth flowing through to profits.
If that starts happening over the next few reporting periods, I think investors could become much more bullish on the stock.
