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Highlights

  • DroneShield shares surged 17.5% in March, outperforming the ASX 200 index, which fell 4%.

  • Defence sector strength and increased investor interest contributed to the share price rally.

  • Bell Potter maintains a "Buy" rating with an AU$1.10 price target, implying 21% upside potential.

March proved to be a positive month for DroneShield Ltd (ASX:DRO), as the counter-drone technology company's share price climbed 17.5% despite broader market weakness.

While the ASX 200 index declined 4% during the month, DroneShield's shares managed to defy the downturn, driven by a mix of sector-wide momentum and increased investor confidence.

What Drove the Rally?

One of the key factors behind DroneShield's performance was the rising investor optimism in the defence sector.

The Betashares Global Defence ETF (ASX:ARMR) has risen 15.5% year-to-date, significantly outperforming the ASX 200 index, which is down almost 4.5% over the same period. This trend reflects a growing belief that defence spending will continue to expand, benefiting companies like DroneShield.

Another boost for the stock came from Regal Partners Ltd (ASX:RPL), which increased its stake in DroneShield from 5.69% to 7.2%.

Regal Partners purchased approximately 13 million shares at the end of February, signaling confidence in the company’s long-term potential.

DroneShield’s full-year results, released in late February, initially caused a dip in its share price. However, some investors saw this as a buying opportunity, believing the company was undervalued.

Investment firm Bell Potter also reaffirmed its confidence in DroneShield, maintaining a "Buy" rating with an AU$1.10 price target. The firm acknowledged that DroneShield's 12-month performance did not fully meet expectations but highlighted the company's strong near-term outlook and growing order book.

According to Bell Potter:

"The value of contracts received year-to-date (~$47.8 million) is evidence of increased levels of customer activity. DroneShield is well placed to meet this demand, having materially increased the scale of its operations and heavily invested in its inventory levels."