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DroneShield (ASX:DRO) was one of the hottest plays of late 2023 into 2024, when the company’s market cap hit $2 billion (absolutely disproportionate to revenue) and briefly became the talk of the local bourse.
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Once short sellers moved in, however, the stock sharply sold off – this occurred rapidly after the stock hit $2.60 – pretty much exactly reflecting a $2B market cap. Perhaps short sellers hadn’t needed to make a move on the stock, seeing as this seemed a fairly obvious psychological level from which to sell the stock.
Its decline may also have been driven by broad investor fatigue towards the Russia-Ukraine war, which was the real catalyst that drove interest in Droneshield originally.
Not helping matters for the stock is that it trickled through a number of deals sub-US$10 million, and never declared another shipment of tech to Ukraine, the contract that put the stock on the map.
But that was then, and this is now.
In a world where the U.S. government has begun demanding Western allies boost defence spending; and in an Australia where we’ve done just that, Droneshield has been quietly climbing back to its former volatility over the last few months.
(It probably also helps that Ukraine’s latest surprise drone attacks on Russian airbases have led to some excitement around the C-UAS proposition.)
As of midday Wednesday, the stock notched $1.51/ea, bringing its market cap to $1.3 billion. That’s still well above where Droneshield’s fundamental revenues sit, but it appears that right now, the market doesn’t really care.
Liquidity is back for the counter-drone (“C-UAS”) technology provider, with 17M shares trading hands on Tuesday for $26.6M worth of trades, compared to a four-week average of 8.5M shares trading hands per day.
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The question now is how long the stock can last in this renewed thematic environment – again, Droneshield’s fundamentals haven’t drastically changed – but it’s been on a good run since shares first climbed back to $1.00/sh in mid-April.
Maybe the better question to ask is: what might the next sell level be for traders?
DRO last traded at $1.50/eah.
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