DroneShield Ltd (ASX: DRO) shares were sold off on Tuesday.
The counter drone technology company's shares ended the session almost 9% lower at 80 cents.
This followed the release of the company's full year results which revealed slightly weaker than expected operating earnings.
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What are brokers saying about the result?
Bell Potter has responded relatively positively to the results, though, it notes that it was largely pre-released. The broker said:
CY24 result largely pre-released. DRO recorded revenue of $57.5m, representing +6% growth YoY, at a gross margin of 71.7%. The EBITDA result of -$8.6m was below our estimates (-$8.0m) and largely driven by a substantial increase in operating expenses as the company scales up its operations. The better-than-expected net loss of -$1.3m (BPe -$4.8m) was the result of a $5.5m income tax benefit. No dividend was declared and none was expected. The company recorded an operating cash outflow of -$62.2m (BPe -$55.9m) and the cash balance was $215.2m as at 18-Feb-25.
Its analysts also highlight that Droneshield is well-placed for 2025 thanks to its significant contracted revenue and lucrative sales pipeline. It said:
DRO has $52m of contracted revenue for delivery in 2025, which represents 90% of the CY24 result, and has recognised approximately $18.0m in revenue YTD. The company has a robust sales pipeline of $1.2b, which does not include major near-term sales opportunities such as the as LAND156 program in Australia (rollout of C-UxS solutions across Australian Defence Force) due to difficulty quantifying the opportunity.
Should you buy the dip?
Bell Potter thinks that the pullback by Droneshield shares has created a very attractive buying opportunity for investors.
According to the note, the broker has retained its buy rating and $1.10 price target on the company's shares.
Based on its current share price of 80 cents, this implies potential upside of almost 40% for investors over the next 12 months.
Summarising its view of the result and the stock, Bell Potter said:
This result was largely as expected, as such, our focus was on the company's performance so far in CY25, which remains positive and well-ahead of CY24. However, the lumpiness of contract awards remains, with the company receiving an additional ~$4m in contracted revenue in February compared to the $48m received in January. Ultimately, we remain bullish on a much-improved performance in CY25, however it is still too early to determine to what level the strong early performance can be repeated throughout the year.
