Are Austal shares a buy after weeks of heavy gains and losses?

Austal Ltd (ASX: ASB) shares are no strangers to volatility. They swing sharply as investors pile in and out of the fast-emerging defence sector.

Last week, the Australian shipbuilder was one of the big winners with a gain well over 25%. Austal shares have started this week completely different, as they have lost 10.6% at $5.64 during afternoon trade.

Let’s have a closer look at how brokers see this wild stock.

Heavy defence spending

Over the past 12 months, defence stocks like Austal have been in the spotlight as global conflict and geopolitical risk have led to heavy defence spending.

Austal is an Australian shipbuilder that designs, builds, and supports defence and commercial vessels for customers worldwide. Its portfolio spans naval ships and surface combatants, high-speed military support vessels, patrol boats, offshore platforms, and passenger and vehicle ferries.

Investor sentiment has largely been positive on this sector. At the time of writing, Austal shares are 40% higher than a year ago, but they have fallen 15% so far in 2026.

The 12-month range, with the stock trading between $3.50 and $8.82, shows how volatile Austal shares have been over that period.

Good news, bad news

The company has had some good news in recent months, and the share price soared. In mid-December, it reported that it had been awarded a contract extension to build another two Evolved Cape Class patrol boats for the Australian Border Force.

Two weeks ago, the share price plunged. The company issued a brief statement to the ASX saying that, in preparation for publishing its half-year accounts, it had identified some discrepancies. Austal revealed that it had previously overstated its potential earnings for the year. 

In a statement to the ASX on Friday morning, the board of Austal shares said its Australian defence division had been awarded a $4 billion contract to build eight landing craft heavy (LCH) vessels. Austal said the construction would take place at its Henderson shipyard in Western Australia and would start in 2026 and carry on until 2038.

In reaction to the new contract, Austal shares surged over 5%, bringing the total plus for the week to 28%.

What next for Austal shares?

TradingView data show that most analysts are positive on Austal shares. Most of them see the ASX defence stock as a hold or strong buy with an average 12-month price target of $7.24. This points to a 28.5% upside at the time of writing.

Bell Potter is more cautious than most colleagues. In a recent report, the broker lowered its price target on Austal shares from $8 to $6.60. This target indicates roughly 17% upside from current levels. 

Bell Potter maintains its hold rating, saying:

When stripping out the MMF 3 earnings from future consensus forecasts, we observe that ASB trades in line with global peers on an EV/EBIT basis for FY26. Although ASB exhibits superior revenue growth, operational risks are relatively elevated as ASB transitions from legacy to new shipbuilding contracts in the USA. We retain Hold.

The post Are Austal shares a buy after weeks of heavy gains and losses? appeared first on The Motley Fool Australia.

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Motley Fool contributor Marc Van Dinther has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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.