DroneShield Ltd (ASX: DRO) has experienced significant volatility in recent weeks. After reaching a peak of $2.72 per share in mid-July, the company's stock has dropped by more than 60%, currently trading at $1.01.
Recent analysis suggests that this may present an appealing opportunity for investors.
Evaluating DroneShield’s Investment Potential
Recent insights indicate that now might be an opportune moment to consider DroneShield shares. Analysts have updated their view on the company, highlighting the potential value in its current share price. As an ASX tech stock, DroneShield's evolving position in the technology sector could be worth examining.
One of the key developments influencing this perspective is DroneShield’s recent completion of a $120 million capital raising. This funding will be directed towards advancing the company’s research and development (R&D) efforts, specifically in integrating artificial intelligence into next-generation drone defense systems.
DroneShield is investing $90 million into R&D to stay ahead in the rapidly evolving drone technology landscape. Additionally, $20 million is allocated for strategic acquisitions, with the remaining funds supporting operational costs and working capital.
Future Prospects and Financial Adjustments
Following the capital raising, the company’s earnings forecasts have been adjusted to reflect the impact of dilution and increased expenses. The company is expanding its software engineering team, which is expected to influence EBITDA margins, with projected margins of 22%, 23%, and 33% for 2024, 2025, and 2026, respectively.
Despite these changes, the outlook for DroneShield remains positive. The company’s strong sales pipeline, valued at over $1.1 billion, and a contracted order backlog of $28 million suggest a robust second half of the year. The adjusted earnings estimates account for a decrease in expected earnings per share for the next few years due to the equity raise and higher operating expenses.
A Strategic Opportunity
The recent drop in DroneShield’s share price is viewed as a potential entry point for investors. With the company well-positioned to leverage both short-term market opportunities and long-term strategic goals, the recent decline in share value could offer an advantageous investment opportunity.
DroneShield’s current situation presents a noteworthy option for those considering investments in the evolving field of drone technology.