Ann: 2Q24 Results Call, page-16

Bell Potter:
Click Here for article: Why did this top broker just downgrade DroneShield shares? (msn.com)

Current price target: $1.60 (downgraded to HOLD)
Long term estimates increased

Short term view:
"According to the note, the broker has downgraded its shares to a hold rating (from buy) with an improved price target of $1.60 (from $1.00). This is broadly in line with where DroneShield shares ended yesterday's session"

Long term view:
However, despite this, the broker has increased its long-term estimates to reflect its larger sales pipeline. It said:

"We have upgraded our revenue forecasts from CY25 onwards based on near-term defence opportunities in the increased sales pipeline and longer-term civilian applications. We now forecast revenue of $129.2m/$162.9m in CY25/CY26 and our EPS forecasts are 4.5c/6.2c. The operating leverage in the business, driven by high gross margins (+70%) and a relatively fixed cost base, will see significant bottom line earnings growth on any upside to our current revenue forecasts."

Summary:
"Bell Potter summarises its downgrade as follows:Our long-term view of DroneShield remains unchanged, we view the company as a market leader in the still immature counter-drone market and one who will continue to benefit from substantial tailwinds in the defence sector. The company continues to be an attractive vehicle for exposure to popular investment themes, including geopolitical tensions, increasing use of drones and the rise of AI. However, at its current valuation DRO will attract increased scrutiny over its short-term performance and future contract announcements, thus we anticipate continued share price volatility. On this basis, we have downgraded our recommendation to HOLD as we await further evidence of pipeline conversion in the 2H or a more attractive entry point."