Droneshield’s Contract Win Fuels Stock Surge
Droneshield Limited (ASX: DRO) experienced a remarkable uptick in its share price, soaring over 20% during early trading on Wednesday. This surge comes on the heels of a substantial contract acquisition, valued at $61.6 million, from a privately owned European reseller. This contract stands as Droneshield’s largest single order to date, surpassing their anticipated revenue for the 2024 financial year, which is projected at $57.5 million.
Management has indicated that due to recent expansions in production and inventory, they expect to fulfil the complete order within the current quarter, with cash payments anticipated in the latter half of the calendar year. This significant contract not only showcases Droneshield’s capability to manage such a large order efficiently but also highlights their ability to operate without the need for extended lead times or additional capital investments.
The timing of this contract aligns with the increasing global demand for drone defence systems, largely driven by the ongoing conflicts in Ukraine and escalating tensions in the Middle East. Consequently, Droneshield has already seen a 35% rise in shares this month before the recent spike in trading.
Droneshield’s Contract History
Droneshield has gained momentum over recent months through a series of contract announcements, with most agreements typically falling between $3 million and $10 million, although larger contracts exceeding $30 million have occasionally surfaced. The table below outlines the company’s significant contract wins amounting to $10 million or more and the corresponding share price performance on those announcement days.
| Date | Contract Amount | Customer | % Change |
|---|---|---|---|
| 25/06/2025 | $61.6 million | European military customer | TBD |
| 14/04/2025 | $32.2 million | Asia Pacific customer | 16.2% to $1.03 |
| 08/10/2024 | $13.5 million | US government | 1.1% to $1.34 |
| 17/07/2023 | $33 million | US government | 18.8% to $0.31 |
| 09/01/2023 | $11 million | Government agency | 16.0% to $0.29 |
| 21/12/2022 | $11 million | Government agency | 20% to $0.21 |
Source: Author’s own research
A pertinent question arises regarding the longevity of these gains; can the contract wins foster sustained upward momentum for the share price, or are we witnessing a potential ‘pump and dump’ scenario? The following table illustrates how Droneshield’s stock has responded post-announcement:
| Date | Close | % Change | 2 Days | 1 Week | 1 Month |
|---|---|---|---|---|---|
| 21/12/2022 | $0.21 | 20.00% | 2.38% | 11.90% | 54.76% |
| 9/01/2023 | $0.29 | 16.00% | -12.07% | -5.17% | 17.24% |
| 17/07/2023 | $0.32 | 18.87% | -3.17% | 6.35% | 0.00% |
| 8/10/2024 | $1.35 | 1.13% | -2.97% | -15.61% | -36.80% |
Source: Author’s own research
The post-announcement performance has been inconsistent, with some contracts resulting in sustained gains while others quickly retract.
Future Outlook
The current geopolitical landscape has undoubtedly been a strong catalyst for defence sector stocks, exemplified by the performance of peers like Electro Optic Systems, which has surged about 40% in June alone.
Among the few brokerage firms covering Droneshield, Bell Potter retains a Buy rating, with a target price set at $1.50. Their forecasts for FY25 include:
- Sales: $140 million
- EBITDA: $39 million
- Earnings per share: 3.5 cents
The recent substantial contract wins suggest that these estimates might be conservative. The latest figures depict a promising growth trajectory:
- Q1 2025 Revenue: $33.5 million (+102% year-on-year)
- Sales Pipeline: $2.41 billion (+367% year-on-year)
- Year-to-Date Secured Revenue: $161 million
- Cash Balance: $198.1 million (as of June 20)
The two latest contracts—valued at $32.2 million and $61.6 million—collectively represent $93.8 million, accounting for a significant 67% of Bell Potter’s full-year sales forecast. This could lead analysts to revise their earnings expectations for FY25 upwards.
Overall, Droneshield has experienced substantial growth, with shares increasing approximately 250% since their February 2025 lows. However, the stock remains highly volatile, as investors balance valuation and earnings concerns along with positive sentiment driven by escalating geopolitical tensions and a robust momentum of contract acquisitions.
