DroneShield Ltd. (DRO:ASX; DRSHF:OTC) got a 25% boost in its price target by financial services firm Bell Potter, to AU$0.30 per share from AU$0.24 to "reflect improved confidence in the sales pipeline and validation of the company's product offering," reported Bell Potter analyst Daniel Laing in a November 10 research note. In comparison, DroneShield's current share price is about AU$0.205.
What led to this upwardly revised target price is DroneShield recently exhibiting "an impressive ability" to convert sales opportunities to revenue, Laing wrote. The Australian company manufactures counterdrone technology.
"The size and frequency of contracts throughout the calendar year 2022 offer some validation of this pipeline and provide us with greater confidence for the calendar year 2023 (CY23) and beyond," added Laing.
"This is forecast to continue with a particularly strong H2/22, providing momentum into CY23," wrote Laing.
Since Sept. 1 of this year, DroneShield announced four contracts totaling AU$750,000-plus, with various clients in the U.S., Europe, and Asia.
Further, as of mid-October, the company's pipeline contained about AU$50 million (AU$50M) worth of projects for 2022 and about AU$180M worth for next year and further out.
DroneShield's conversion success has led to "strong earnings momentum in recent periods," Laing pointed out. Revenue in 2021, for example, of AU$10.6M was 89% higher than the previous year's.
"This is forecast to continue with a particularly strong H2/22, providing momentum into CY23," wrote Laing.
The analyst also highlighted DroneShield's progress in gaining a foothold in the U.S. market. In the last few months, the company landed a record AU$1.8M contract with the U.S. Department of Defense for the DroneGun MKIII, which the federal agency endorsed as one of three counterdrone systems to be used at domestic military bases. In addition, DroneShield garnered its first U.S.-based research and development contract, also with the DOD.
"A key upcoming catalyst for the company will be greater detail on the deployment of its technology at U.S. military bases following the U.S. DOD recommendation, namely the timeline and number of bases," Laing wrote.
Bell Potter maintained its Buy recommendation on DroneShield.
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Disclosures For Bell Porter Securities, DroneShield Limited., November 10, 2022
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