You're unlikely to hear any long-term investors in DroneShield Ltd (ASX: DRO) shares complaining about their returns.
Shares in the S&P/ASX 300 Index (ASX: XKO) drone defence company are marching higher again today, up 2.1% at $1.05.
That sees the stock up an eye-popping 279% in 12 months.
Now, as you can see on the chart below, not all shareholders will be sitting on fat gains today. Investors who bought the stock on 15 July, when DroneShield shares closed at an all-time high, will be down some 58%.
But I believe that even those investors who bought at the peak, if they stick it out and hold onto their shares, could be back in the green as early as next year.
Here's why.
DroneShield shares catching a lot of global tailwinds
There are a number of reasons I believe DroneShield shares can continue to soar higher. Though investors should be prepared for significant volatility. It's not uncommon for the stock to move up or down by 5% to 10% in a single trading day.
The first reason for my bullishness is that DroneShield's technology is rapidly embracing artificial intelligence. With AI advancing at breakneck speeds, it should propel the company's anti-drone capabilities to successively higher achievements.
My second reason for thinking the 15 July high water mark will fall, probably sooner than later, is the rather frightening state of world affairs.
Drone attacks in the Russian-Ukraine war and in the Middle East are happening every day now. And with global military spending surging, DroneShield shares are well-placed to benefit from further defence contracts.
As the company stated recently:
The conflicts in Ukraine, Middle East and elsewhere globally are demonstrating the role of drones in modern warfare and driving procurement programs of government customers around the world seeking to be prepared for the next conflict.
Indeed, earlier in October, the Netherlands pledged €400 million (AU$648 million) in drone aid for Ukraine. The Dutch government said it would provide drones for offensive and defensive purposes, as well as reconnaissance.
And over the weekend, Hezbollah was reported to have used a drone to target Israeli Prime Minister Benjamin Netanyahu's house.
Unfortunately, these stories are just the tip of the global conflict iceberg.
Doubling sales pipeline
MPC Markets' Mark Gardner is also optimistic about the outlook for DroneShield shares, with a buy rating on the stock (courtesy of The Bull).
"The ongoing conflicts in Ukraine and the Middle East have underscored the critical need for counter-drone technology, which is driving a surge in demand," Gardner said.
He added:
DroneShield, a leading provider of artificial intelligence powered counter drone solutions, is well positioned to capitalise in this growing market. The global anti-drone solutions market is expected to grow exponentially moving forward. DRO doubled its sales pipeline since March 31, 2024, to $1.1 billion at August 23, 2024.
DRO recently announced a repeat US government order of a $13.5 million contract.
The repeat US government order Gardner refers to involves an unspecified number of DroneShield's dismounted Counter-UxS systems, announced on 8 October.
Commenting on that order, Tom Branstetter, DroneShield's director of business development, said:
DroneShield's ability to rapidly deliver high-performance, lifesaving technology at this scale sets us apart in the counter-UAS industry, empowering our clients with cutting-edge solutions precisely when they need it.
DroneShield shares closed up more than 1% on the day.
