ASX consumer discretionary shares have suffered a tough 12 months. 

The sector has faced several headwinds over the past year. 

Why are consumer discretionary shares struggling?

Some of the major contributors have been high interest rates, weaker consumer confidence, pressure on household budgets, and growing evidence that retail earnings are softening.

Consumer discretionary shares rely on consumer confidence because they sell non-essential products that consumers can easily delay or cut back on when they feel uncertain about their finances. 

Lower interest rates can reduce mortgage and debt repayments, giving consumers more disposable income to spend on clothing, dining, and entertainment. 

As a result, falling rates, stronger employment and improving consumer confidence can increase discretionary spending and support retailers‘ sales and earnings, while the opposite can hurt them.

One such consumer discretionary stock affected by these pressures is Lovisa Holdings Ltd (ASX: LOV). 

The fashion jewellery and accessories retailer has seen its share price fall 42% in the last 12 months. 

However, a new report suggests it could be a rebound candidate. 

Bell Potter optimistic

Overall, Bell Potter believes this option stands out amongst the retail sector because of its global expansion potential, attractive gross margins and low-price-point proposition. 

The broker said the key attraction is Lovisa’s international growth opportunity, particularly in the US and UK. Bell Potter sees significant room to expand beyond the current ~250 US stores, while the UK could benefit from the exit of a major competitor. 

They also expect relatively easier comparable-sales conditions in the coming months, which could help Lovisa maintain its strong start to FY27.

We continue to see further prospects arising from changes in the US/UK/South African competitor environment with the exit of the key competitor, offsetting risks in the Australian market with a fast growing competitor. 

While we remain cautious on the current weak consumer landscape and investments into market share & store refits to mitigate competitive pressures in key markets, we see a higher tolerance re accessibility from a low price point perspective together with a strong gross margin. LOV stands out in our coverage as a global retailer scaling its presence from ~50 regions with strong US/UK performance with better efficiencies within the US store network.

Healthy upside 

At the time of writing, Lovisa shares are trading at approximately $22.87.

However, the broker has a buy rating and $27.00 price target on the consumer discretionary stock. 

This indicates a healthy upside of 18%. 

The post Is this the best value stock amongst the ASX consumer discretionary sector? appeared first on The Motley Fool Australia.

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

DroneShield Ltd (ASX: DRO) shares are in freefall, and investors are starting to ask an uncomfortable question.

The counter-drone technology company closed at $1.60 on Monday, a fresh 52-week low, leaving the share price a staggering 76% below its previous high of $6.70, reached at the end of October last year.

When a stock falls that hard, the temptation to call a bottom gets stronger. But is the risk-reward actually tempting enough to buy? Or is this a falling knife dressed up as a bargain?

The demand story hasn’t gone anywhere

The numbers tell a grim story. DroneShield shares are down 20% over the past month and 49% over the past year. For a stock that was once one of the ASX’s hottest momentum plays, this is a stunning reversal of fortune.

Here’s the twist, though. While the share price has collapsed, the underlying business case hasn’t. Drones are not going away. If anything, they’re becoming more central to modern warfare, border security and the protection of critical infrastructure. That means governments and defence customers still need systems that can detect, track and stop them.

DroneShield is actually converting that demand into hard revenue. Its latest update showed FY26 committed revenue had reached $251 million, with a further $46 million already committed for FY27 and beyond. First-half revenue surged 74% to $125.8 million, while recurring revenue rocketed 229% to $11.5 million — a sign the business is shifting from one-off sales toward something stickier.

The company also landed its first order for its new RfRecon product from an existing Western European military customer. It’s not financially material yet, but it’s early validation for another product in an expanding range.

The catch: this is still a loss-making bet

None of that changes the fact that DroneShield is bleeding cash. First-half underlying EBITDA was $12.4 million in the red, and the statutory loss came in at $32.2 million.

DroneShield shares remain one of the highest-risk stocks on the ASX. Defence contracts don’t arrive on a neat schedule, so revenue can be lumpy and unpredictable.

The company is scaling fast, but investors still need proof that bigger revenue eventually turns into sustainable profit, not just bigger losses. And as governments pour more money into counter-drone systems, larger, better-funded defence contractors could pile into the same opportunity, squeezing DroneShield’s edge.

What are the brokers saying?

TradingView data shows just four analysts cover the stock — split evenly, with two buys and two sells.

The average 12-month price target for DroneShield shares sits at $1.99, roughly 24% above the current share price. Bell Potter is the most bullish at $2.40, with Canaccord Genuity close behind at $2.60.

Foolish takeaway

DroneShield isn’t a stock for the faint-hearted. The growth numbers are genuinely exciting, but the losses, volatility and competitive threats are just as real.

For risk-tolerant investors who believe in the counter-drone thematic, this pullback might be the entry point they’ve been waiting for. For everyone else, this is one to watch from the sidelines.

The post DroneShield shares just hit a new low. Is the only way up from here? 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 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.

Shares in water technology company Vysarn Ltd (ASX: VYS) are up more than 25% over the past 12 months, but according to the team at Morgans there is plenty left in the tank.

Deal failure leads to downgrade

This prediction comes despite the recent announcement that Vysarn had abandoned its proposed acquisition of NewGround, which it had announced in June.

Vysarn was to buy out NewGround for 33 million shares and $25 million in cash, with the deal expected to be 25% earnings per share accretive to Vysarn shareholders.

Morgans said the failure of the deal led them to downgrade their pre-tax profit expectations for Vysarn by 14% in FY27 and 19% in FY28, which would be the first full year of ownership.

But the broker added that Vysarn was now cashed up.

As they said:

Unwinding the cash consideration and noting the recent $65m raise – which included ~$15m for growth initiatives and working capital – the company has significant balance sheet optionality.

Morgans reduced its price target on Vysarn shares from $1.40 to $1.20, compared to 78 cents currently, but said it was still a solid business.

The broker said:

VYS is transforming into a multi-jurisdictional, vertically integrated water business. The company is continuously deploying cash into engineering, facilities management and consulting businesses, which is a sound strategy that should see the company continue to improve in quality. Moreover, the prospects of owning and selling water … continue to strengthen.

Solid growth in earnings

Vysarn’s FY26 operational revenue grew by 31% to $140 million, while net profit was up 41% to $15.1 million.

The company said of the result:

In FY2026, Vysarn continued to develop and execute its strategy to be a leading vertically integrated water services and infrastructure provider across multiple geographies and sectors in Australia. The Company maintained its trend of material year on year earnings growth delivered by the performance of its diversified water services across consultancy, hydrogeological drilling, test pumping, managed aquifer recharge (MAR) and wastewater treatment. While Vysarn’s growth to date has been underpinned by the iron ore sector in Western Australia (WA), the Company’s targeted pursuit of various diversified growth opportunities across other sectors and geographies is starting to bear fruit. The Company anticipates that meaningful organic growth in future periods will start to be driven by sectors and regions other than resources and WA.

The company said it would remain on the lookout for more acquisitions, and was also intending to invest heavily in senior management.

Vysarn is valued at $496.5 million.

The post This ASX water technology stock could jump 45% Morgans says appeared first on The Motley Fool Australia.

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• Vysarn FY26 earnings: Revenue and profit surge

Motley Fool contributor Cameron England 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 recommended Vysarn. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.