DroneShield Ltd (ASX: DRO) shares were on form on Wednesday.
The counter drone technology company's shares ended the session 4% higher at 64 cents.
This was driven by the release of its quarterly update and the announcement of a big new contract win in the Asia-Pacific region.
The good news is that one leading broker believes that there are plenty more gains to come and is urging investors to snap up shares while they can.
What is the broker saying?
According to a note out of Bell Potter, its analysts were a touch disappointed with the company's performance in FY 2024 but are very pleased with its "flying start" to FY 2025.
Commenting on its updates, the broker said:
DRO recorded full-year revenue of $57.5m (vs BPe $65.8m), representing YoY growth of just +6.3%, and a net loss of $(4.8)m (vs BPe net profit $6.4m). The operating cash outflow was $(57.9)m (vs BPe $(42.1)m) and DRO had a cash balance of $220.6 million as at 31-Dec-24 (vs $57.9m at 31-Dec23). The miss to BPe estimates can be largely attributed to the lower revenue and faster scale up of the business than we forecast, driving an increased cost base.
The key takeaway from the announcements, however, was the $47.8m in contracted revenue YTD, representing 83% of the CY24 result. This level of contracted revenue for CY25 was well ahead of expectations and includes the $11.8m Asia Pacific contracts, the $9.7m Latin American contract as well as a substantial number of contracts (~$26m) valued at <$5m, which are not released to the market.
In light of this, the broker continues to forecast revenue of $103.8 million in FY 2025. This represents an 80% increase year on year.
Bell Potter has also pencilled in a net profit after tax of $16.6 million for the year, which compares favourably to an estimated loss of $4.8 million in FY 2024.
DroneShield shares tipped to rise strongly
The note reveals that Bell Potter has responded to yesterday's updates by retaining its buy rating on the company's shares with a trimmed price target of $1.10 (from $1.20).
Based on its current share price of 64 cents, this implies potential upside of 72% for investors over the next 12 months.
The broker concludes:
Whilst DroneShield's performance over the last 12-months did not meet expectations, the near-term outlook is considerably more positive. The value of contracts received YTD (~$47.8m) is evidence of increased levels of customer activity and DRO is well placed to meet this demand having materially increased the scale of its operations and heavily invested in its inventory levels. We retain our BUY recommendation.
The post Why DroneShield shares could rise 70% appeared first on The Motley Fool Australia.
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended DroneShield. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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