Forget SpaceX stock and buy this exciting ASX share

SpaceX has been one of the biggest stories on Wall Street since its June initial public offering (IPO).

Its shares surged and then almost halved from their peak, showing how quickly excitement can run ahead of valuation.

For investors looking for a high-growth technology opportunity, I think there is a better option on the ASX.

Why I would leave SpaceX alone

Space Exploration Technologies Corp (NASDAQ: SPCX) listed at US$135 per share before racing as high as US$225.64.

That early enthusiasm has since disappeared, with the stock recently reaching a 52-week low of US$113.31.

The lower price will tempt investors who believe Starlink, Starship, space launches, and other long-term projects could support enormous growth. I can understand the interest because SpaceX has built capabilities that few companies can match.

Even after the decline, I think the stock carries a demanding valuation. Investors are still being asked to pay heavily for growth that may take years to reach its full potential.

Space exploration also requires huge amounts of capital, while technical setbacks, launch delays, competition, and regulation can all affect the investment case.

I would rather look for a company where the valuation gives me more confidence in the potential return.

The ASX share I would buy

DroneShield Ltd (ASX: DRO) would be my choice.

The company develops counter-drone technology that helps defence forces, governments, and security organisations detect, track, and respond to unwanted drones.

Its hardware remains the largest source of revenue, including portable and fixed systems designed for military sites, airports, prisons, critical infrastructure, and other sensitive locations.

I think the long-term demand picture is becoming clearer. Drones are becoming cheaper, more capable, and easier to access, while their use across warfare, surveillance, smuggling, and disruption continues expanding.

That creates a growing need for technology that can recognise a threat quickly and help customers decide how to respond.

DroneShield also has a major opportunity to increase its software revenue. Its systems need regular updates as new drone models, signals, and tactics emerge, giving the company scope to sell software subscriptions, threat libraries, support, and other ongoing improvements.

A larger software contribution could deepen customer relationships and gradually make revenue more recurring.

Does the valuation look better?

DroneShield shares are trading around $2.21.

According to CommSec consensus estimates, the company is expected to generate earnings per share of 2.6 cents in FY26, 4.3 cents in FY27, and 7.4 cents in FY28.

That puts the shares on price-to-earnings ratios of approximately 85 times FY26 earnings, 51 times FY27 earnings, and 30 times FY28 earnings.

The near-term valuation is still high, although it falls quickly if the company delivers the expected earnings growth.

I do not think 30 times FY28 estimated earnings looks excessive for a business with a large global opportunity and the potential to grow both hardware and software revenue.

DroneShield still needs to win contracts, expand production, manage rapid growth, and compete with much larger defence companies. Government procurement can also make revenue uneven between periods.

Those uncertainties are why I would keep the position measured.

Foolish takeaway

SpaceX may eventually grow into its valuation, but I think investors are still paying a considerable price for that possibility.

DroneShield offers exposure to another fast-growing technology market at a valuation I find easier to justify based on current earnings forecasts.

The company has established hardware products, a growing software opportunity, and a specialist position in a market receiving increased attention from defence and security customers.

At around $2.21, I would forget SpaceX stock and buy DroneShield shares instead.

The post Forget SpaceX stock and buy this exciting ASX share appeared first on The Motley Fool Australia.

Motley Fool contributor Grace Alvino has positions in DroneShield. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended DroneShield. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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