Counter-Drone Technology Company Surges to New Highs

DroneShield Ltd. (DRO:ASX; DRSHF:OTC)  has captured the market's attention with its remarkable stock performance. Recently, the company's shares surged by 7.34%, reaching a new all-time high of AU$2.34 per share. This milestone comes as DroneShield's stock has soared more than 316% since January 2024, demonstrating a relentless upward trajectory. The counter-drone technology firm's shares hit an all-time closing high of AU$1.54 per share earlier this week, propelled by a series of positive updates that have bolstered investor confidence and attracted significant interest.

The company's impressive performance is underpinned by its innovative drone detection and disablement technology, which has garnered substantial global demand from militaries, governments, and critical infrastructure sectors. In the first quarter of FY 2024, DroneShield reported a staggering 900% year-over-year revenue increase to AU$16.4 million. This remarkable growth has not gone unnoticed by investors, who have been actively purchasing shares, driving the stock to new heights.

One of the pivotal moments for DroneShield was the approval of the first counter-small UAS (CUAS) procurement framework agreement by the NATO Support and Procurement Agency (NSPA). CEO Oleg Vornik highlighted this as one of the "most strategically" important events in the company's history. Additionally, DroneShield secured a significant repeat order worth AU$5.7 million from a US Government customer for its Counter-UxS systems, emphasizing the growing recognition and demand for its products.

Investor sentiment towards DroneShield remains highly positive, further evidenced by the company's successful capital raises. In April, DroneShield completed an oversubscribed share purchase plan, raising AU$15 million despite receiving AU$40 million worth of applications. Another share placement saw the company raise AU$30 million by selling 37.9 million shares at 80 cents each.

DroneShield's Catalysts

Several catalysts have contributed to DroneShield's impressive stock performance. The company's cutting-edge technology and strategic contract wins on multiple occasions have played a crucial role. Frazis Capital highlighted the potential growth of DroneShield shares, noting that most of its FY 2024 revenue forecasts stem from "high margin" defense contracts. The successful capital raises have also reinforced investor confidence in the company's growth prospects.

Analysts project continued revenue increases for DroneShield, with Bell Potter recently rating the shares as a buy and forecasting AU$97 million in sales and AU$24.4 million in earnings for FY 2024. CommSec has also rated the stock as a strong buy. CEO Vornik envisions a bullish scenario where DroneShield could grow sales to AU$500 million per annum within five years, driven by rising demand for counter-drone technology in both public and private sectors. This projection represents a ninefold increase from FY 2023 revenues of AU$55 million.

What They’re Saying About DroneShield…

According to MSN on July 11, "DroneShield Ltd (ASX: DRO) shares have been shooting the lights out over the past year." Despite a slight retrace of 0.93% to AU$2.13, the shares of the drone defense company were up an impressive 719% over the past 12 months. Investors had been sending DroneShield shares higher amid ongoing and rising global tensions. Over the last year, DroneShield had capitalized on growing defense demand, securing a series of multi-million dollar contracts with government agencies worldwide. The company reported record first-quarter revenues of AU$16.4 million on April 15, up 900% from AU$1.6 million in the prior corresponding quarter. The quarterly results also included a AU$27 million contracted backlog and a sales pipeline of over AU$519 million. Notably, on June 20, shares hit another all-time high after the company announced a AU$4.7 million order from a new non-government Swiss international customer.

DroneShield CEO Oleg Vornik highlighted the strategic importance of the NATO Support and Procurement Agency's (NSPA) approval of the first counter-small UAS (CUAS) procurement framework agreement in the organization’s history. He stated, "This order highlights DroneShield expertise not only as a maker of cutting-edge AI-based C-UAS sensor and effector technologies, but also a system integrator, for demanding applications that involve multiple sensor and effector modalities, operating in tough conditions."

MSN also reported that Frazis Capital's founder Michael Frazis noted that DroneShield recorded revenues of AU$55 million in 2023, more than triple the AU$17 million in 2022, with analysts forecasting 2024 revenues of over AU$90 million, driven by high-margin defense contracts. Tamim Asset Management also commented on DroneShield's financial results for the first quarter of 2024, praising the company's tenfold year-over-year revenue growth and significant increase in order intake. Tamim Asset Management added, "As the threat of drone-related incidents continues to rise, DroneShield is well-positioned to capitalize on the increasing need for effective counter-drone technologies."

As the Motley Fool wrote on June 19, "DroneShield Ltd (ASX: DRO) shares have been on a tear in 2024, soaring more than 316% into the green since January." The company’s stock hit an all-time closing high of AU$1.54 per share on a recent Tuesday. The Motley Fool attributed DroneShield's stellar performance to its cutting-edge drone detection and disablement technology, which had attracted significant global demand from militaries, governments, and critical infrastructure sectors. The NATO Support and Procurement Agency's (NSPA) procurement framework approval and a significant US$5.7 million repeat order from a US Government customer were among the key milestones.

Bell Potter rated DroneShield shares a buy, forecasting AU$97 million in sales and AU$24.4 million in earnings for FY 2024. CommSec also rated the stock as a strong buy. CEO Vornik projected that DroneShield could grow sales to AU$500 million per annum within five years, representing a ninefold increase from FY 2023 revenues of AU$55 million.

Shaw and Partners rated DroneShield Ltd. with a Buy recommendation and a price target of AU$1.40, according to a research report published on May 31. Analyst Abraham Akra highlighted DroneShield's position as a market leader in counter-drone (C-UAS) technology, specializing in AI-driven solutions for terrestrial, maritime, and airborne platforms. Akra noted that the company is expected to benefit from rising global defense spending and the increasing focus on C-UAS capabilities.

Akra estimated the total addressable market for C-UAS technology to exceed US$10 billion, with the military accounting for approximately 37% of this market. He stated, "We expect DRO's 10-year track record, certifications, product suite across mobile and fixed site CUAS will facilitate sales growth to exceed market growth rates." The rising defense budgets of the US and NATO member nations were also emphasized as key drivers for DroneShield's growth.

Additionally, Akra pointed out DroneShield's approval by the US DoD for C-UAS systems and the recent NATO agreement, which simplifies the procurement process across NATO countries. He concluded, "We see DRO reaching an inflection point in sales and profitability with the NATO agreement supplementing the DoD recommendation and solidifying DRO as a market leader in C-UAS." Key catalysts for DroneShield include the C-UAS Airservices Australia Tender, quarterly financials, material contract announcements, and NATO orders post-agreement.

Yahoo Finance, in May, highlighted DroneShield's impressive return on equity (ROE), stating, "DroneShield's ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested." With a ROE of 13%, DroneShield outperformed the industry average of 9.9%, which added context to the company’s exceptional 36% net income growth over the past five years. Analysts expected the company's earnings to double over the next few years, indicating a very optimistic future ahead.

Simply Wall Street wrote in May that DroneShield had seen a significant share price rise of 106% in the past couple of months on the ASX. Despite the rally, the company still fell short of its yearly peak, suggesting potential opportunities for investors during future price dips. Simply Wall Street also noted that DroneShield's earnings were expected to double in the coming years, leading to stronger cash flows and higher share value.

Ownership and Share Structure

Management and insiders own 11% of the company. CEO Oleg Vornik owns 2.23% of the company with 15 million options on a fully diluted basis.

Non-Executive Chairman Peter James owns 0.58% of the company with 920k shares and 3 million options, on a fully diluted basis, and Non-Executive Director Jethro Marks owns 0.22%, with 1.5 million options, on a fully diluted basis, according to DroneShield.

The company reports that the largest independent investor, Charles Goode, owns 4.41% of the company with 21.5 million shares, while strategic investors own a total of 13.99% of the company.

Eprius Inc. is the second largest shareholder, with 3.16% of the company having 18.5 million shares.

The company reports that there are about 763 million shares outstanding and about 56 million free-float traded shares.

Its market cap is about AU$1.5 billion, and it trades in a 52-week range of AU$1.37 and AU$2.02.

Important Disclosures:

1. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of DroneShield Ltd.
2. James Guttman wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
3.  This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company. 

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