6th Jul '21 by Craigralphs

77 comments 4885 reads

Hi Folks

Just wondered if anyone else had taken the plunge in what is undoubtedly a bit of a gamble.

I am familiar with the company and it’s use cases and how it does what it does in a very ‘hot’ industry in which I still work.

But I am not a financial advisor or analyst, so my punt is on a “I know what they do and it makes sense to me in terms of what they do technically and from a risk perspective, how they do it, and the companies that also believe in them as customers,”

So far the investment looks to be a winner (I bought in at £3.50/share but perhaps not on the best financial basis).

Any better or more financially sound opinions out there?

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About the Author

Craigralphs

Premium Member

77 comments

dodge1664

2nd Nov '21

I remain of the view that Darktrace is basically Autonomy 2, until proven otherwise. Reasons for believing this:

(1) many former Autonomy employees now occupy senior positions at Darktrace

(2) the company appears to emphasize telephone sales over RnD

(3) the results so far have been all about revenues rather than income

I'd love to quiz Keith Ashworth-Lord about this one.

gus 1065

2nd Nov '21

11 million more shares coming on to the market via a secondary placing from Vitruvian Partners being launched just now. About 1/3 of their 4.6% holding.

https://www.investegate.co.uk/....

Won’t do much to help shore up the share price.

Gus.

gus 1065

3rd Nov '21

Placing completed at 580p, 8% discount to last night’s close.

https://www.investegate.co.uk/...

Gus

Howard Adams

8th Nov '21

Hi all

Darktrace (LON:DARK) up +12.44% @ 14:15 today.

This note is likely the catalyst, as summarised on my news feed.

BUZZ-Darktrace shares jump, Berenberg praises its "product strength"

DarktraceNews11:09 am** Darktrace shares up 9.5%, set for one of its best day
since its IPO early this year after a torrid couple of weeks

** Darktrace was a standout success in a rocky year for tech
listings in London, but its shares fell for two consecutive
weeks urn:newsml:reuters.com:*:nL8N2RU1VU

** Berenberg reiterates its buy after it visited the
Cambridge-based company to conclude that "any share price
capitulation is a result of fear not fact"

** "The site visit shed light on the product strength," the
analysts say

** The bank forecasts net client retention rate to continue
to increase as Darktrace management confirmed two new product
categories

** The analysts see Darktrace's new product Prevent -- which
finds vulnerabilities in companies’ systems similar to a
penetration testing -- to benefit from growing regulation
mandating the regular use of penetration testing

Regards
Howard

(I hold)

BnB

8th Nov '21

I bought back in at £5.80. It’ll make up for selling half my Trade Desk holding into earnings after multiple adtech slumps this earnings season. Sod’s law they’re going to open much higher in 10 minutes from now. At least I kept the other half.

Howard Adams

8th Nov '21

Hi All

Chairman bought £149,125 on 5/11/21. Not huge but notable. He paid 5.965/share for 25,000 shares

Regards

Howard

CharlesRixon

12th Jan '22

Darktrace could do well surely , now around 450p with averge of % brokers Target Price at 775P???

CharlesRixon

12th Jan '22

Lots of news on Darktrace today in FT, Times, Daily Mail, Telegrapgh and other news sources....Dark could be one of the top performing shares of 2022 and re-enter FTSE 100 within 6 months

BnB

12th Jan '22

Lots of news on Darktrace today in FT, Times, Daily Mail, Telegrapgh and other news sources....Dark could be one of the top performing shares of 2022 and re-enter FTSE 100 within 6 months

All of that is possible and the shares might end up looking ludicrously cheap in retrospect at one third of the valuation of US peers on an EV/revenue basis. Before taking the plunge, it's worth noting that the concerns with Darktrace (LON:DARK) include:

a) the nagging worry that expenditure on sales and marketing is far outstripping R&D - basically a recipe for Blue Prism, which did not go well. despite burgeoning demand in the sector

b) the fact that Darktrace's products fall under the "nice to have" category rather than being essential. A deliberate simplification would be that Crowdstrike and Palo Alto aim to keep viruses out, Darktrace will tell you if any got in

c) Most leading names in cybersecurity, even hyper growth names like Zscaler, are already generating prodigious amounts of free cash flow at margins around 30%, while Darktrace, admittedly a younger business, has very low margins

It could be argued that the price already reflects those risks and I would take comfort from the multiple upgrades issued by management. It certainly has some potential at these prices.

CharlesRixon

12th Jan '22

Not a Blue Prism case ......AI and self learning tech needs less R and D....ood pipeline of products, and Dark partners with Microsoft and Microsoft clients....UK tech people also cheaper than Silicon Valley....

Dark I understand also has /developing products that keep Virus out too

BnB...you seem to know well the Cyber players and metrics...

Sentinel One, Paolo Alto, Crowdstike and Fortinet and many other players

Needham target price 1000 p

Piper Sandler 600p

Berenberg 1000 p

Peel Hunt 475 p

Jeffries 800 p

Today around 450p

epo001

12th Jan '22

Really? Really? Did a search for Darktrace on Google, the news coverage is a plethora of identical stories saying there was a price rise yesterday following an improved outlook statement. They are probably all printing the same press release. So the company says that things might get better meaning, "oh come on, the SP has been falling for 3 months now, give it a rest".

And that word "could" is doing a lot of heavy lifting.

This stock was, and remains, a pure gamble. I'll need a lot of convincing to make a Market Cap of c. £3b on sales of c. £200m seem reasonable.

slopsjon

12th Jan '22

"AI and self learning tech needs less R and D"

Do you have any evidence of that being true.

If AI was that advanced that it reduced the need for teches and programmers, I think my Alexa would be able to answer my questions that hadn't been programmed into it. I speak as a Software Engineer myself who has automated my home with ESP32 devices and Node Red programming to carry out tasks and using Alexa to respond to my voice.

If I developed a new virus I doubt that Darktrace would be left to it's own devices to Identify, Analysis and then provide a solution to combat the virus. I think AI is still in its infancy and requires a lot of monitoring and human input.

BnB

16th Jan '22

I'll need a lot of convincing to make a Market Cap of c. £3b on sales of c. £200m seem reasonable.

Current run rate for recurring revenues is £426m. That’s a lot of growth since the last time you checked the figures. Remember they’ll earn that again next year before any new sales are added to the total. And thanks to a Net Retention Rate > 100, existing customers will come back for more products before new customers are needed to meet the projections. Nevertheless, the number of customers has grown by 40% this year. That suggests its products are far from nearing the end of the adoption curve, and that c.30% growth is not unreasonable to forecast for FY June ‘23.

Of course, if you’re a traditional value investor those figures won’t be enough for you at twice the growth or half the price. But it’s important to grind the numbers to understand the bull case. Compounding those growth rates, even accounting for the law of ever-increasing numbers, brings you to a considerably higher valuation given sufficient time with a competitive product suite. As an early mover in AI-based cyber threat detection, the business has a decent head-start - yet is valued at a third of US competitors.

Success is far from guaranteed but consider the runway for cyber security. Barring an apocalyptic return to the Stone Age, there will never again be a time when governments, the military, people and organisations don’t need to spend increasing amounts of money to protect against cyber threat. That’s never, ever for the rest of your days and beyond. The tricky bit is picking out some winners - but you can be sure they’ll all be at least as expensive, probably much more!

Howard Adams

17th Jan '22

I'm guess you have seen this

Not read the article, but exited my position as taken quite a beating over past months. Still think Darktrace (LON:DARK) is a (rare) UK-tech growth stock and expect to re-enter once my portfolio recovers a bit and Darktrace (LON:DARK) price stabilises.

Regards

Howard

BnB

17th Jan '22

The short report pretty much gels with my comments of 12th Jan below. In other words there is nothing new in it that wasn’t already understood by the market. Indeed, I’ve read that the report first emerged back in October when Shadowfall had an established short position whereas today there is no evidence that the position still exists.

However, that does not mean Shadowfall has got it wrong and the price remains a balance of risks and opportunities, not a measure of risks alone!

Scoobydoit

17th Jan '22

Darktrace (LON:DARK), Thg (LON:THG), Burford Capital (LON:BUR) the list is endless of good companies being attacked by short funds. Any serious UK growth company that reaches a relatively high valuation seems to get gets a short note issued. I wish these guys would go look at the US tech stocks but they can’t influence the market so easily over their. Darktrace (LON:DARK) may have $600m ARR by the end of 2022 for goodness sake.

Howard Adams

3rd Apr '22

A chart from McKinsey might interest some

BnB

13th Apr '22

Interesting reaction to a minor revenue upgrade today. Shares initially up 2% in tune with the upgrade but now down more than 10%. My hunch is that the market has got used to bigger upgrades and considers that this is the end of the outperformance cycle.

What's fascinating is that this name has completely detached from the bullish interest surrounding cybersecurity in the US, with Sailpoint's potential acquisition having been announced earlier this week and much discussion of which stock is the next M&A target. I have already had Proofpoint and now Sailpoint bought out from under me, rather profitably.

Darktrace shares are not expensive on an EV to turnover basis - which is the most relevant metric for a fast-growing cybersecurity stock - reflecting doubts (Peel Hunt, JP Morgan) about its competitiveness as a product. But this can be a profitable name to trade. I'd be a buyer towards £3.00.

dodge1664

31st Jan '23

another short seller attack today

https://www.theguardian.com/bu...

below £2 at one point..

Berksbee

31st Jan '23

Dam,

I dipped my toe in last week and it got bitten, but that at least explains yesterdays drop.

Left me pondering now about what do.

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About the Author

Craigralphs

77 comments

BUZZ-Darktrace shares jump, Berenberg praises its "product strength"

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