DroneShield’s Bearish Flag Flies Highest Even as Order Book Hits Record

The optics are hard to reconcile. Australia’s most heavily shorted stock just posted its best-ever half-year sales, reaffirmed full-year guidance, and watched two brokers stick with buy ratings — yet the market’s most bearish traders have never been more entrenched.

Data from the Australian Securities and Investments Commission shows DroneShield now carries the largest short interest of any listing on the Australian exchange. That positioning, disclosed in late August, helps explain why a 74 percent surge in first-half revenue to A$125.8 million failed to ignite any sustained rally. Since the results landed last Wednesday, the shares have slipped 0.9 percent.

A Loss-Making Growth Engine

The bearish thesis is not without its hooks. DroneShield swung from a year-earlier profit of A$2.1 million to a first-half loss of A$32.2 million, while adjusted EBITDA flipped from a positive A$8.0 million to a negative A$12.4 million. For short sellers, the combination of blistering growth and deepening red ink offers a straightforward argument: revenue alone does not justify the valuation.

Yet the balance sheet tells a different story. The company closed the half with A$180 million in cash and term deposits and zero debt. That war chest gives management runway to scale new products, though skeptics counter that it may be precisely what’s needed to survive a loss-making expansion phase.

The order pipeline, meanwhile, is substantial. Contracted revenue stood at A$240 million as of August 21 — covering 89 to 96 percent of the company’s full-year target of A$250 million to A$270 million. Management also points to an additional A$43 million in contracted sales slated for 2027 and beyond.

Should investors sell immediately? Or is it worth buying DroneShield?

Recurring Revenue Gains Traction

One shift in the numbers may matter most for longer-term investors: recurring revenue now accounts for 9.2 percent of total sales, up from roughly 3 percent a year ago. The growth is driven by an expanding software business, signalling a gradual move away from pure hardware sales toward more predictable income streams.

That evolution is central to the company’s product roadmap. The new RfRecon reconnaissance system, unveiled about a month ago, is expected to contribute its first sales in the second half of 2026, with momentum building into 2027. Further announcements on so-called defeat platforms for drone countermeasures are slated for late 2026 and into next year.

Analysts Split on Price, United on Rating

The two broker responses to Wednesday’s results illustrate the divide. Bell Potter trimmed its price target from A$2.50 to A$2.40 but maintained its buy recommendation. Canaccord Genuity held firmer, keeping its target at A$2.60. Both houses remain constructive despite the stock’s travails.

The market has yet to follow their lead. At the German trading venue, the shares closed Friday at EUR 1.07, up 2.6 percent on the day — though the secondary source notes a 2.3 percent Friday gain, leaving a weekly decline of 1.4 percent. The stock still trades roughly 16 percent below its 50-day moving average of EUR 1.28 and sits 72 percent beneath its 52-week high of EUR 3.79, set in early October.

With an annualised 30-day volatility of 87 percent, this remains a vehicle for the risk-tolerant. The central question for the months ahead is whether DroneShield can close the gap between its revenue trajectory and its profitability before the weight of short positioning becomes self-fulfilling — or whether a sustained run of contract wins turns that same bearish bet into a squeeze.