Bell Potter (I never trust their targets ) have updated their price target on DRO. Still a buy but lowered... now $1.25

Bell Potter upgrades DroneShield but cuts price target

10:58am today

The news: Bell Potter analysts have upgraded their recommendation on DroneShield to ‘buy’ but cut their price target on the stock following a capital raise by the company.

The numbers: The brokerage cut its earnings per share estimates for DroneShield for FY24, FY25 and FY26 based on the dilutive effects of the equity raising and higher operating expenses.

As a result, its 12-month price target is down 22% to $1.25.

DroneShield shares were up 2% to $1.04 in early trading on the ASX.

The context: The counter-drone technology company raised $120 million earlier this month, issuing shares at a discounted price of $1.15 each and marking the second time in three months that the company raised capital.

Of the proceeds, $90 million is designated for tech research and development, $20 million to fund potential acquisitions and the balance $10 million for working capital and offer costs.

What they said: “We have increased the operating expenses throughout the forecast period based on the significant scaling of the software engineering team, which naturally places downward pressure on our EBITDA estimates and delays our forecast margin expansion until CY26,” Bell Potter analyst Daniel Laing said in a note.