DroneShield Ltd. (DRO:ASX; DRSHF:OTC) "is approaching an inflection point" and should become cash flow positive in 2022, wrote Peloton Capital analyst Darren Odell in an April 27 research note.
Peloton Capital projects DroneShield will expand its sales pipeline to AU$150M in 2022 and to AU$170M in 2023.
This year "is proving to be a transformative year for the company, following material groundwork that occurred in the prior three years, leading to strong momentum in group sales," added Odell.
DroneShield provides artificial intelligence (AI)-powered, counter-drone, or C-UAS, solutions that protect unmanned aircraft systems from many threats. DroneShield is currently selling its systems in the Five Eyes countries (an intelligence alliance between Australia, Canada, New Zealand, the U.K. and the U.S.), the Middle East and Ukraine.
Odell highlighted the indicators that point to the tech company imminently turning cash flow positive.
One is that demand for DroneShield's products is increasing globally.
"Not surprisingly, governments worldwide, have become increasingly concerned about the growing risks from drones that can carry weapons, engage in chemical warfare and disrupt airport flights," Odell wrote.
He noted the company is well positioned in Australia, where it is headquartered. In Europe and the United Kingdom (U.K.), DroneShield has longstanding partnerships and the closure of several deals is on the horizon.
In the U.S., the company is expanding operations and sales. Various federal and state governmental agencies, such as the U.S. Department of Defense, along with the public safety private sector are showing interest in DroneShield's solutions.
Two, the drone protection company is well positioned financially. It is fully funded and has AU$8 million (AU$8M) in cash and AU$16M worth of inventory.
Also, DroneShield is increasing overall product sales, indicated Odell. With about AU$50 million in its short-term sales pipeline now, the company is likely to reach its FY22 sales targets.
Peloton Capital projects DroneShield will expand its sales pipeline to AU$150M in 2022 and to AU$170M in 2023.
Further, DroneShield recently started manufacturing drone smart jammers in Sydney, Australia, after getting an exemption permit from the Australian Communications and Media Authority, the first one ever granted, Odell relayed. Now, with the permit in hand, DroneShield plans to ramp up developing and optimizing "advanced AI-powered electronic warfare and counter-terrorism technologies in Australia."
Finally, DroneShield expects to close additional deals this year, at least two sizable ones plus several smaller transactions, wrote Odell.
Peloton Capital has a Buy rating and a AU$0.30 per share price target on DroneShield, the stock of which is trading now at around AU$0.0235 per share.
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Disclosures:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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Disclosures for Peloton Capital Pty Ltd., DroneShield Ltd., April 27, 2022
Peloton does and seeks to do business with companies covered in research. As a result, investors should be aware that the firm may have a conflict of interest which it seeks to manage and disclose.
Peloton and its directors, officers and employees or clients may have or had interests in the financial products referred to in this report and may make purchases or sales in those the financial products as principal or agent at any time and may affect transactions which may not be consistent with the opinions, conclusions or recommendations set out in this report. Peloton and its Associates may earn brokerage, fees or other benefits from financial products referred to in this report. Furthermore, Peloton may have or have had a relationship with or may provide or has provided, capital markets and/or other financial services to the relevant issuer or holder of those financial products.
Specific Disclosure: Peloton Capital raised $17m for DroneShield (DRO), announced September 2020, for which it earned fees.
Specific Disclosure: The analyst does hold securities in DRO.
Specific Disclosure: The report has been reviewed by DRO for factual accuracy.
Specific Disclosure: As of 27th April 2022, Peloton Capital held nominal DRO shares and 15m call options. This position may change at any time and without notice, including on the day that this report has been released. Peloton and its employees may from time-to-time own shares in DRO and trade them in ways different from those discussed in research. Peloton Capital may arrange the buying and selling securities on behalf of clients.
