Most investors know that government contracts are as good as gold. Especially when it comes to the military sector.
Landing a deal with the Department of Defence (DoD) can be a game changer. Turning a company from a relative outlier into a profit powerhouse. If, both parties can come to a long-term arrangement.
That’s why shareholders of Etherstack PLC [ASX:ESK] have reason to be excited today. With this very tiny software company landing a new deal with the DoD. Their first ever military contract.
A deal that has seen the ESK share price spike 4.15% higher at time of writing.
Stage one deal
Etherstack is known for its wireless technology. Specialising in a ‘mission critical’ focus.
They build software that is at the cutting edge of radio solution. Whether it be for defence, telcom, or other industries.
Today they’ve signed their first licensing contract with the DoD. A $4.1 million deal that is merely stage one of what could be a multi-package agreement.
But, Etherstack was quick to note that there are no guarantees.
However, with over 20 years of experience in supplying both European and North American defence outfits, they certainly have the pedigree.
As CEO David Deacon comments:
‘This program builds upon existing Etherstack technology and creates a significant Australian export opportunity to both other nations and international military equipment manufacturers.
‘The supplied solution is repeatable and the first of its kind that will be compliant to a specific military standard. Etherstack expects interest from existing and new radio manufacturer customers internationally, as well as other nations, and will attempt to rapidly capitalise through licensing the solution to other countries.
‘We have a proven track record of engaging and contracting with this customer base.’
All the company needs to do now is deliver on this broader opportunity.
What’s next for the Etherstack share price?
Suffice to say, today’s breakthrough with the DoD is a fantastic sign. One that may lead to further deals, as the company clearly hopes.
For that reason, shareholders have plenty of reasons to be pleased. With an opportunity for further gains up for grabs depending on how Etherstack’s plans unfold.
That makes them a fairly risky investment as of right now. With their future potential largely dependent on speculative outcomes.
But that doesn’t mean you should ignore Etherstack — or any speculative stock for that matter. As long as you have the right strategy in mind, you can find success trading even the most volatile stocks.
Our resident expert on the matter — Murray Dawes — has been doing so for years now. Using unique technical analysis to help traders get the most out of their investments whilst limiting their exposure to risk.
For more info on how Murray does it, read his latest guide, right here.
For Money Morning