DroneShield Ltd (ASX: DRO) shares are having a difficult year.
On Friday, the trend is continuing with the counter-drone technology company's shares falling to a 52-week low of $1.41.
That's a disappointing decline of approximately 71% from their 52-week high of $4.80.
With so much value wiped off the company's market capitalisation, investors may be wondering whether now is a good time to buy.
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Why have DroneShield shares fallen so far?
I think a major reason for DroneShield's decline is that investor expectations had become extremely high.
Earlier this year, excitement around rising defence spending and the growing use of drones in modern warfare helped push its shares to high levels.
However, as the company has continued expanding, investors have become increasingly focused on how quickly it can translate its opportunities into sustainable profits.
DroneShield reported strong revenue growth in the first half of 2026, but its underlying EBITDA turned negative as the company invested heavily in expanding its operations.
And while its longer-term sales opportunities remain substantial, defence contracts can be unpredictable in their timing and size. This makes it difficult to forecast earnings with much confidence.
The company's valuation also remains a consideration. Despite its enormous share price decline, DroneShield still has a market capitalisation of approximately $1.3 billion.
Investors are therefore paying a lot for its future growth potential.
Why I remain positive
Despite these challenges, I think DroneShield has an exciting long-term opportunity.
The growing use of drones in military conflicts has demonstrated how important it is for governments to invest in technology that can detect and neutralise these threats.
And I expect demand for counter-drone systems to continue increasing as defence budgets grow and the technology becomes more widely adopted.
We are already seeing evidence of this. Earlier this year, NATO allies announced plans to invest more than US$40 billion in counter-drone capabilities over the next five years.
DroneShield is well-positioned to benefit from this trend, having established relationships with military and government customers around the world.
Its recent progress is also encouraging. Earlier this month, DroneShield released an ASX announcement that it had secured $261 million in committed revenue for FY26, with additional commitments extending into FY27 and beyond.
The company has also secured access to a US government procurement arrangement with a ceiling of US$500 million over three years.
Although this arrangement does not guarantee orders, it provides another opportunity to win significant business in the coming years.
As DroneShield expands its manufacturing capacity, develops new products, and grows its software offering, I believe it has an opportunity to become a much larger defence technology business.
Should I buy DroneShield shares?
At around $1.41, I think DroneShield shares are worth considering for investors with a high risk tolerance.
However, I would approach this investment with patience and realistic expectations.
Investor sentiment towards the company has deteriorated significantly, and it could take considerable time for confidence to return.
There is also nothing to suggest that the recent declines cannot continue, particularly if the company experiences contract delays or struggles to improve profitability.
For these reasons, I would only consider DroneShield as part of a balanced portfolio, with a relatively modest position that reflects its higher risk profile.
Foolish takeaway
I believe DroneShield shares could be a rewarding long-term investment at current levels.
The structural trends supporting demand for counter-drone technology are favourable, and I think the company has an opportunity to capture a meaningful share of this growing market.
Of course, the journey is unlikely to be smooth, and I wouldn't be surprised to see further volatility over the coming months.
