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specvestor

552 Posts.

279

05/10/23

20:13

Post #: 70197218
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Originally posted by Mayi: ↑

DRO's share price dynamics are pretty simple:

1) It is subject to macro effects like the rest of the market. At the moment market sentiment is pretty negative. And that impacts DRO like everyone else. Also, microcaps will get hit harder than the general market during downturns.

2) For all its promise. DRO is a loss making company that is burning cash. To keep its share price stable it must have increasing sales, otherwise its long term value will tend to zero. As a result, big sales contracts will lead to a spike, but if there are no big announcements its share price will drift back.

It has been 3 months since it's last big sale, so DRO is currently in the drift down mode. Whether the share price is higher in the long term will be determined by whether the sales growth is higher than that expected by the market. In 2023, that has certainly occurred and that is reflected in the share price. Last year it mostly traded in the 15-20c range this year in the 25-30c range. But the market is forward looking and is turning its attention to what will happen in 2024. As, I have previously suggested, my view is that if 2024 matches 2023 revenue, that will probably be enough to maintain the share price after such a big increase in 2024 (particularly if it is profitable). Most years it will have to grow.

This all means that it is pretty clear who is going to make money and who is not in DRO. Those that buy after a long period of drifting down are likely to do ok, assuming the company keeps heading towards profitability. Those that buy into the big spikes are likely to be burned even if the company improves (those that did so in any of the last three spikes are down 30%). It seems to me, assuming that one has faith in future orders, that we are now heading into a buy a window. The share price has drifted back quite a lot and hopefully there will be another order soon that will lead to another spike.

During the last spike, I warned against over exuberance and was shouted down. People were claiming future share prices anywhere between 40-90c per share. Some still are. Yet here we are at 25c and falling...

I know I am repetitive and boring, but the logic has proved sound. This is a really dangerous end of the market, and I again encourage investors not to get drawn into the hype, because that is expensive (the hype has now disappeared - it always does sooner or later). Look at what companies have achieved, not what people dream of or claim that they may do in future. I won't wish you good luck because luck is fleeting. I wish you good thinking instead.

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It's often boring and repetitive but it's fair and well measured. Generally feeling a lot of pinch across the market. DRO is very early on in the growth story and while there is a lot of positive signs, statistics tells us we're far more likely to fail to live up to potential.

Owning the stock now because you believe in it should (a) encourage you to buy more as the price drops and (b) encourage you not to care about short term price.

However, given the overall market conditions and cost of living pressures i can understand peoples apprehension at a downward sloping share price. Will continue to be DRO's story i suspect until they have enough consistent runs on the board. Waiting for big sale announcements isn't wise.

DRO Price at posting: 25.0¢ Sentiment: Buy Disclosure: Held
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(20min delay)
Last $1.37		Change 0.045(3.41%)		Mkt cap ! $1.190B

Open	High	Low	Value	Volume
$1.32	$1.38	$1.30	$12.40M	9.136M

Buyers (Bids)

No.	Vol.	Price($)
10	90320	$1.36

Sellers (Offers)

Price($)	Vol.	No.
$1.37	69277	8

View Market Depth

No.	Vol.	Price($)
1	34	1.430
1	361	1.385
2	25002	1.380
8	15734	1.370
4	2864	1.365

Price($)	Vol.	No.
1.315	457	1
1.325	789	1
1.335	53128	1
1.340	78000	2
1.345	30000	1

Last trade - 16.10pm 30/09/2024 (20 minute delay)

DRO (ASX) Chart

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