DroneShield Ltd. (DRO:ASX; DRSHF:OTC) landed a record $33 million ($33M) contract with the U.S. government to supply anti-drone equipment and related services, reported Bell Potter analyst Daniel Laing in a July 17 research note. Based on this news, Bell Potter increased its target price on DroneShield to $0.45 per share from $0.40, a 12.5% increase.
"This is clearly a business defining contract for the company," Laing wrote. "We believe the most likely near-term sales opportunity is an initial contract for the rollout of counter-drone technology across U.S. military bases."
The Australian defense products company is currently trading at about $0.315 per share, with a potential return of around 43% to the target price, noted Laing.
DroneShield remains a Buy.
Significance of contract
This newly awarded contract is DroneShield's largest, three times the size of its previous record contract, Laing quantified. The $33M contract value is nearly twice the amount of the company's total revenue last year.
Including this contract with the U.S. government, DroneShield's backlog now stands at about $62M, of which Bell Potter expects $50M to be recognized this year, Laing explained. The $50M is much higher than its previous full-year 2023 revenue estimate of $30M.
Accordingly, the investment firm boosted its revenue growth expectations of DroneShield, by 77% for 2023, 34% for 2024 and 6% for 2025.
Further, wrote Laing, DroneShield's sales pipeline contains 80-plus opportunities with a total value of about $200M.
"DroneShield has demonstrated strong earnings momentum in recent periods," wrote Laing. "We believe this momentum is likely to continue with a particularly strong calendar year 2023."
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Important Disclosures:
- DroneShield has a consulting relationship with an affiliate of Streetwise Reports, and pays a monthly consulting fee between US$8,000 and US$20,000.
- As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of DroneShield.
- Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
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Bell Potter Disclosures, DroneShield Ltd., July 17, 2023
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