The news: Analysts at Bell Potter raised their recommendation for DroneShield to “buy” but lowered their price target for the stock following a capital increase by the company.

The numbers: Due to the dilutive impact of the capital raise and higher operating expenses, the brokerage firm has lowered its earnings per share forecast for DroneShield for FY24, FY25 and FY26.

As a result, the price target for the next 12 months fell by 22% to $1.25.

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

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

Of the proceeds, $90 million will be used for technical research and development, $20 million to finance potential acquisitions, and the remaining $10 million for working capital and offering expenses.

What they said: “We have increased operating expenses throughout the forecast period due to the significant expansion of the software development team, which naturally puts pressure on our EBITDA estimates and delays our forecast margin expansion until calendar year 2026,” Bell Potter analyst Daniel Laing said in a note.