Darktrace - Big fan
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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77 comments
another short seller attack today
https://www.theguardian.com/bu...
below £2 at one point..
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.
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.
Hi
A chart from McKinsey might interest some
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.
Hi
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
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!
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
"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.
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
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.
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.
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!
Darktrace could do well surely , now around 450p with averge of % brokers Target Price at 775P???
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"
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)
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.
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
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.
Placing completed at 580p, 8% discount to last night’s close.
https://www.investegate.co.uk/...
Gus
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.
A contarian play ? Taken a pounding in last few trading days and with threat/Promise of Mike Lynch selling his huge stake after this Wednesday, then things could take off with a possible acquistion. Lynch is the Dr No of IT at present and with his poss US extradiction looming, Darktrace investors would do well to be rid of him and his toxic reputation. DT have some great tech and understanding of the market, with Lynch gone poss more money would go into RD and other measures to placate instituional investors.
Thanks for an interesting take on recent developments. Certainly I will sit tight and see what transpires,
This thread has a strong whiff of true believers egging each other on. While it is undoubtedly true that cybersecurity will be very important, the question is whether Darktrace has any significant revenue potential. We simply can't know that.
I received a GCHQ approved Masters in cybersecurity a couple of years ago and as it happens my dissertation was on machine learning to provide automated threat detection. I know enough to know how little I know.
The particular problem with ML is that your models are as good as the training data, if that data is not representative of the threats then the detection rate will be poor. ML is at its best when the actual data is static in nature, e.g. facial recognition; but if the training data is biased the results will be off; if the facial training data was mainly white faces then the accuracy of recognition of non-white people will, unsurprisingly, be very poor.
Cybersecurity is non static and as threats evolve the models must also evolve, if they don't the models rapidly become irrelevant. And as ML becomes more widespread the threats will incorporate cloaking to hide themselves.
Naive ML is good for detecting script kiddies, against industrial strength novel attacks? Not so much. The question for all these companies is how well they evolve to cope with evolving attacks because eventually even the script kiddies will get better toys.
DARK is a pure gamble, at 300ish it may worth a punt, at >700 it is not for me.
Hi epo001
Interesting points, thank you for you insights.
I accept your point entirely about ML and training data used. Also, your point that cybersecurity is not static and must react rapidly to changing threats and technologies.
As I understand it, Darktrace (LON:DARK) do not use ML. Instead they use Self-Learning AI (SL).
That is the AI looks at an interaction stream, keeps watching it, then raises alerts if behaviours on that interaction stream seem to be presenting 'odd' behavioural signals, to the norm for that interaction stream. I understand this watching/alerting can detect oddities which might be very slight variations over several weeks/months on an interaction stream, as a bad actor tests for weaknesses.
I am by no means technical enough to know if what Darktrace (LON:DARK) are presenting is indeed true. But instead, I take some comfort that their teams, their advisory council and their serious customers do indeed accept that their technology offers this sort of leading edge benefit (over competitors).
This is for example, their Advisory Council
https://www.darktrace.com/en/a...
This a promo vid they released yesterday summarising their technologies. Obviously its very glossy but does present an overview.
Finally, I accept your observation that I may be a 'true believer'.
I am unquestionably an optimist by nature and enjoy digging into innovation stocks, so my bias often overrides fundamentals. It has cost me dearly, often, but some wins have countered these costs. I just hope that each year I make an acceptable margin which compounds.
Thanks again for you comments it was useful to get an insight from someone with a masters qualification in cybersecurity, no mean feat I suspect. If you have further views on Self-learning AI versus ML AI I would welcome your thoughts (as others on this thread would I suspect).
Regards
Howard
Very valuable to have your technical input and you're certainly right that tech evangelism can spill over into religious fervour. That's why I don't concentrate my portfolio within each theme - not to mention that I sold DARK when it got extended in the 900s.
I own a representative of each sub-theme within cyber - vulnerability management (Tenable), data protection (Varonis), SIEM (Splunk), Endpoint Protection (Crowdstrike), identity management (Okta and Sailpoint), Fraud detection (Gb (LON:GBG)), Zero trust cloud security (Zscaler and Cloudflare), broad players (Palo Alto and Telos).
Above categories are not definitive but it gives good coverage - and very satisfactory performance to date.
Hi BnB
Nice thematic list I will dig into a few.
Regards
Howard
Tenable: encouraging results last night - with the bonus that it is not expensive relative to growth rates, and profitable.
Thanks for the insight epo001! You bring the conversation full circle from where I started it back in July! My opening comment was indeed ”Just wondered if anyone else had taken the plunge in what is undoubtedly a bit of a gamble.”
My background is also IT Security (as was when I started in1986!) and it has always been a dynamic, challenging and interesting profession. As also stated I am not a financial guru. However, when I am looking for an investment opportunity it is just that. An opportunity not a nailed on winner.
Your insight is relevant and valuable, as is your observation that Cybersecurity is ever changing. I suggest that observation applies equally to the stock markets, but I am not sure that Darktrace (LON:DARK) is anymore of a gamble than many of its peers.
But, I won’t be betting the house on it either. Thanks again and good luck in reaching your investment goals and your career aspirations wherever they take you!
Best Regards, CraigRalphs.
Hi
A positive article praising Darktrace (LON:DARK) s work protecting multiple US infrastructure and utility companies.
https://www.businessweekly.co....
Regards
Howard
Horrible initiation by Peel Hunt at SELL PT 473p. I sold in the low 900s for a breather. Anyone seen the detailed report? Shares still look reasonable next to US competition but Peel Hunt has seen something they don’t like, obvs.
Hi BnB
This is a summary newsfeed on the Pell Hunt sell note for Darktrace (LON:DARK)
BUZZ-Darktrace falls after Peel Hunt initiates with 'sell'
slide 6.9% to 880.42p
** Stock down after Peel Hunt starts coverage with "sell"
and 473p PT
** Peel Hunt is the only brokerage with "sell" rating among
six analysts covering the stock
** The broker says strong growth rates, driven by
go-to-market strategy targeting need for cos to bolster their
cybersecurity defences, will continue, yet sees "disconnect
between valuation and ultimate revenue opportunity"
** PT implies 50% downside to stock's last close as Peel
Hunt's valuation factors in potential market size, growing
competition - both on product and talent - due to co's limited
R&D spend
** Of six brokerages covering the stock, four rate stock
"strong buy" or "buy", one analyst rates "hold" and one "sell"
; median PT is 1,000p
Regards
Howard
Very helpful thank you. Company is under increasing competitive pressure from SentinelOne in the AI-led cybersecurity stakes and I share the worry about the lack of R&D spend - this ultimately did for Blue Prism (LON:PRSM) which was growing at a similar rate a couple of years ago.
Might be nice to give your helpful replier an uptick as as well as a thank you :)
Duly complied but is a written “thank you” no longer sufficient online? :-)
BnB, of course a written "thank you" is more than sufficient, no offence or judgement implied by my comment. I suppose I was just thinking of an uptick as being equivalent to giving an extra pat on the back. So I think we're really on the same page on this...
Have a "like" :-)
Hi BnB
Your response to me was more than acceptable, and thank you for the reminder to watch $S SentinelOne.
Although I do not disagree with the Peel Hunt analysis (I've only seen the short summary though) I do not concur with their assessment of the magnitude of the risks.
IMO I think the market for Darktrace (LON:DARK) s products is large and I believe that UK and European organisations are a step or two behind their US counterparts with regard to cyber protections, on quite a broad front.
Thus I think with Darktrace (LON:DARK) s focus on selling and them being a UK-based company, albeit with strong US connections, I think the TAM is large enough to support them and competitors and winners will rise based on their abilities to execute sales to a broad market base of both B2B and B2C. From my understanding of Darktrace (LON:DARK) they seem to be executing quite well and understand this opportunity.
I will dig deeper into $S SentinelOne and try to assess a comparison.
Regards
Howard
Another risk to contemplate, and I think Peel Hunt picked up on this in their note, is that Darktrace's products are not helpful for the ever growing proportion of SME and enterprise IT that is in the cloud - here "zero trust" products from ZScaler and Cloudflare are more appropriate.
They have an entire "for cloud" platform i thought?
There are different ways of thinking about the cloud. On the one hand it can be where companies have placed their applications, ie on AWS or Azure, for interactions with customers or employees - on the other it can be where cloud vendors host applications for enterprises to use via their networks. The security needs would be different and certainly Cloudflare and ZScaler more appropriate for the first use case. What "for cloud" means in Darktrace's world I couldn't say.
Hi BnB
Useful insights thank you. I hold $NET (Cloudflare) and yes, their product is playing in a much bigger league than Darktrace (LON:DARK), I see $NET as building customer specific internets with traffic routing, data protection, latency optimisation and many other things. Darktrace (LON:DARK) is offering a much narrowing set of products focussing solely on cyber security.
I am not familiar with $ZS (ZScaler) but will take a look.
I was curious to see the respective share prices of Darktrace (LON:DARK) , $NET, $S & $ZS. below a YTD Google view.
Regards
Howard
Nice to meet a fellow Cloudflare investor. I've held NET for some time and ZS for a year. I find the ownership experience with the former rewarding but rather nerve-wracking - investors are talking it up to be the new AWS but the valuation, at 95x revenues, makes it hard to stay a holder! Feedback from the software community is exceptional however.
I'd be interested in any thoughts you have on SentinelOne. There's so many buzzwords in all the marketing from every vendor that it can be hard to define their products accurately. Suffice to say SentinelOne's shares and growth are both eye-watering but you'll have become accustomed to the multiples from your other holdings.
I do find Darktrace's R&D deficiencies a worry. The technologies evolve so fast that you have to keep developing.
Hi BnB
Yes, quite a lot of my holdings are in fact a tad nerve-wracking -:) $PLTR $TSLA $COIN $SHOP S4 Capital (LON:SFOR) Sigmaroc (LON:SRC) and several others, for example.
I have an investing bias for innovation (after doing quite in-depth research), leadership qualities, likelihood of the company creating a platform, and an expectation to hold for at least five years (with sensible slicing/adding to the ebb/flow of a stock). I draw inspirations from ARK Invest and lots of other sources.
I'll take a look at $S SentinelOne.
With respect to Darktrace (LON:DARK) I found this newsfeed encouraging. I suspect both Darktrace (LON:DARK) and $PLTR , as well as $AMZN will benefit from this (I hold all three).
UPDATE 1-Amazon signs deal with British spy agencies to boost use of AI for espionage -FT
Oct 25 - Britain's spy agencies have given a
contract to Amazon Web Services (AWS) to host classified
material in a deal aimed at boosting the use of data analytics
and artificial intelligence (AI) for espionage, the Financial
Times reported https://www.ft.com/content/747... Monday.
Britain's GCHQ spy agency championed the procurement of a
high-security cloud system and it will be used by sister
services MI5 and MI6, as well as other government departments
such as the Ministry of Defence during joint operations, the
report added.
The agreement was signed this year with AWS, Amazon.com
Inc's AMZN.O cloud service unit, and the data of all the
agencies will be held in Britain, the newspaper reported, citing
people familiar with the discussions.
GCHQ said it would not comment on claims about its
relationships with tech suppliers. AWS was not immediately
available for comment.
In February, Britain's cyber spies at the GCHQ eavesdropping
agency said they have fully embraced artificial intelligence to
uncover patterns in vast amounts of global data to counter
hostile disinformation and snare child abusers. urn:newsml:reuters.com:*:nL8N2KU51D
GCHQ has been using basic forms of AI such as translation
technology for years but is now stepping up its use, partly in
response to the use of AI by hostile states and partly due to
the data explosion which makes it effective.
Earlier on Monday, GCHQ Director Jeremy Fleming said at a
conference the number of ransomware attacks has doubled across
the UK in 2021 compared with last year, according to the FT https://www.ft.com/content/2e3....
Regards
Howard
Cybersecurity is a key theme that is lifting all participants so I'm sure Darktrace has plenty of opportunity in the near term - I'm more concerned about its prospects of achieving cashflow generating maturity - which is the gist of Peel Hunt's note. Shares seem to be settling down above the 700 level. I'm not yet tempted to buy back in - not least because I reinvested the proceeds on another expensive tech stock yesterday.
I expect we have a few more stocks in common stateside, including PLTR and SHOP. I like the management at both very much indeed.
Hi BnB
Here is a CNBC clip from yesterday about a new 'serious' hacking by Russian state hackers trying to disrupt the whole tech supply chain. Cyber security is crucial.
Hi BnB
With reference to our previous interactions about valuations of Darktrace (LON:DARK) and US alternatives, take note of the stats the commentator expresses about current spends by SMEs and others on cyber.
IMO these current low levels of IT budget allocations towards cyber protection will need to rise quite a lot.
As I mentioned in a previous post I suspect UK and European businesses are in fact behind their US counterparts on this area of investment
Regards
Howard
All true. I have an outsized allocation to the theme - 10 different holdings!
Announced after the Markets closed today…
Darktrace (LON:DARK) Elevated to the FTSE 100 - that is a significant development in just 6 months IMHO…
Darktrace (UK, BNYK8G8) will be added to the FTSE 100 Index and deleted from the FTSE 250 Index.
Hi
Darktrace (LON:DARK) TU today seems quite positive.
Extract from RNS ....
Operating and Financial Performance
For Q1 FY 2022, Darktrace continued the strong sales performance it delivered in 2H FY 2021, growing its customer base to 5,975, up 42.7% year-on-year. As new customer additions are the primary driver of constant currency Annualised Recurring Revenue (ARR) measures, this resulted in net ARR added for Q1 FY 2022 of $24.1 million, up 63.8% over the same quarter of FY 2021. This unusually high growth in net ARR added was a consequence of comparing to Q1 FY 2021, when sales momentum was materially impacted by the early stages of the COVID-19 pandemic.
This growth in Q1 FY 2022 net ARR added and the strong performance in recent periods resulted in ARR at 30th September 2021 of $381.5 million, up 45.9% year-on-year.
Share price seems to have solid support above 800p. Some of the initial institutional investors have sold shares recently (Summit DT 8.9m, KKR 30.5m), so there is more liquidity now. These occurred in early Oct but share price has recovered.
Today's RNS is here ....
https://www.investegate.co.uk/...
I hold
Regards
Howard
25 million shares (about 5% of the total share count) from a group of the original investors placed overnight at 750p, about an 8.5% discount to last night’s closing price.
https://www.investegate.co.uk/...
Gus.
Hi
Investor Chronicle have written an article on £DARK 28/09/21. It is for IC subscribers I'm afraid (I hold).
The assessment of the author is that Darktrace (LON:DARK) was under priced at IPO but is now possibly over priced (bear in mind IC tend towards value investing and thus look hard at PE values).
The concluding sentence is ...
'Investors should probably look at Darktrace’s own valuation history and might conclude that a fairer value for this business is, for now, closer to a forward sales multiple in the teens rather than the 20-30 times range. The stock was cheap at the IPO, but does not look that way today.'
Regards
Howard
Hi
Darktrace (LON:DARK) down over 8% (at time of typing) today after big rises over past days.
Also, this headline might have some impacts ... Mike Lynch extradition delayed again. Is he and others building up funds to fight in the US courts by selling Darktrace (LON:DARK) share holdings?
https://www.thetimes.co.uk/art...
Regards
Howard
When valuations hit these sort of levels, daily moves in excess of 5% are humdrum. It's had another big move up, so don't sweat it. Darktrace is still considerably lower valued than the companies whose products it most resembles/closely competes with, Crowdstrike and SentinelOne.
Hi BnB
I agree, I expect hold long(ish) term and am adding at a steady rate.
Thanks for the comparators I will research them.
Regards
Howard
Hi Craigralphs
Many thanks for creating this thread on Darktrace (LON:DARK) I have found researching it quite interesting and have made quite nice gains over the past days.
It's up again just over +4% today (as I type). According to Google Finance chart it has gained +14% over 5 days, +66% over a month and +191.26% since IPO 30/4/21.
I note it's about 70% held by major shareholders with about 32% with two US-based venture capital firms. The other 30% approx with Mike Lynch, his wife and other investment companies and individual investors (one the ex CFO of Autonomy now in jail, I believe).
I like many things about Darktrace (LON:DARK) such as: it's a UK tech IPO which could have global potential, it seems to have a lot of credible people and advisors (see Advisory Council on their site), the product seems to be technically ahead of competitors and addressing a very essential need in an innovative manner, to list but a few points.
In short it seems to be ticking a few of Peter Theiel's 'zero to 1' criterion for exceptional start-ups.
Though I'm a little concerned about the major shareholders backgrounds (Mike Lynch likely to be extradited to US to face trial for the HP/Autonomy deal), the 30% approx in just two VC's who might exit at any time, overall I think it might become an important UK tech company (which we certainly need).
My question to you and others on the thread, has anyone had direct experience of using the products or dealing directly with Darktrace (LON:DARK) ?
Any feedback would be insightful.
Regards
Howard
Hi Howard
Thanks for the analysis which I found very informative. To answer your question, no, not directly. I can best describe my experience as ‘once removed’. Meaning that until 3 years ago, I worked for a multi-national IT Security service provider who was using (and working with) Darktrace as part of its Cyber Defence capability.
But I stress I was not directly working with the company, and certainly not privy to any of the commercial agreements underpinning that relationship. So, for absolute transparency, I can best describe my experience as anecdotal.
But I too am happy with the share performance to date, although as in my original post, I absolutely acknowledge the risks that you (and others in this thread) have identified and highlighted, (As an aside I also hold a few Ted Baker (LON:TED) shares and the ‘key player’ risks that crystallised with that company have been well documented),
Hi Howard
I have used Darktrace's main product, the enterprise immune system, for around 18 months at a large multinational. I also worked alongside a former employee who had been there since day 1 but had recently left.
The product itself is very good when set up correctly, and arguably was one of the strongest security controls in place at the time. There was a good sense of reassurance when it was working correctly that it would control most threats almost instantly. Being behavior based, it could be one step ahead in that malicious techniques and exploits may change but the higher level behaviors are still the same and observing these against a standard baseline of normal activity, gave it ability to see events unfolding that traditional products may not.
That said, we used other security monitoring products which were looking to produce offerings similar to Darktraces so their USP may not be so unique when the larger contemporaries incorporate similar technology into theirs.
The chap I worked with who was ex-Darktrace had only moved on for career progression and a change of scenery, he had no bad word to say about the company and they were good to work for.
In my opinion, the product is very good and I could see them potentially being bought out by a competitor like Crowdstrike, CarbonBlack etc
For reference I do not hold any shares in Darktrace
Regards
Alan
Thanks for that contribution Alan. It is good to get that independent (again anecdotal but recent and relevant) industry validation to set against the some of this week’s wild price movements. Cheers
Hi Alan
Many thanks for your useful insights.
The IC article I read (see earlier post), also highlighted the point about how fast competitors are catching up with Darktrace (LON:DARK) .
I share your view that a (highly) possible event might be a buy up by a competitor. It would remove competition from the market for a purchaser, give them IP, add a new customer base to their own and quite usefully help them acquire a large pool of cyber security talent which is in short supply.
We shall see.
Regards
Howard
Hi Craigralphs and others
Useful thread on £DARK.
The recent results presentation video is quite useful.
https://ir.darktrace.com/finan...
Also many vids on Darktrace (LON:DARK) YouTube channel here ...
https://www.youtube.com/channe...
Regards
Howard
Even after the recent run-up Darktrace (LON:DARK) remains undervalued relative to its two main listed competitors by technology, Crowdstrike and SentinelOne, even allowing for its slightly lower growth rate. That, I assume is a UK thing. I hold a basket of >10 cyber security stocks, including Darktrace, and have seen the theme grow ever more important to corporations relative to other areas of tech spend. I don’t expect that to change. I’d keep your holding but consider diversifying into other names either directly or via an ETF.
Following yesterday’s Final results announced by Darktrace ( Darktrace (LON:DARK) ) there is a nice short explainer and overview article in the Investor’s Chronicle here that I saw today:-
https://www.investorschronicle...
(If the link fails, try a search for - ”Darktrace fills the cyber security void”)
Enjoy! :-)
Article in Shares today but I'm not a subscriber so if anyone can add a summary here. Maybe in the magazine tomorrow which I get free as have investments with them. They get a lot right IMHO.
Big drop today but I suppose profit taking ?
It looks like it is the Mike Lynch association - https://www.bbc.co.uk/news/bus...
Well - the Trading update issued by £DARK certainly hasn’t seemed to done th Shareprice any harm!! Not so far anyway…
InteresttIng - for better or worse! Darktrace Darktrace (LON:DARK) have issued a statement today to the London Stock Exchange that they will be issuing a Trading Update on Thursday…..
We shall see what that brings…
Article warning of a bubble in European IPO valuations, though Darktrace (LON:DARK) reduced by 50% from earlier hype so perhaps reality is creeping in https://www.bloomberg.com/news...
At the other end of the spectrum, a pre-seed mechanical engineering business I'm considering has raised its pre-money valuation from £2m last autumn to £8m today. Justified by bench marking against others in the field - not sure that stacks up.
I looked at Darktrace, as I'm also a fan of Keith Ashworth-Lord.
Some things that put me off:
(1) the relationship between Mike Lynch and Dark Trace. Mike Lynch is currently fighting extradition to the US over the takeover of Autonomy by Hewlett Packard.
(2) I do not understand why the SGA expenses for Darktrace dwarf the R&D costs. That seems very odd for a technology company
(3) I have heard from multiple sources that Dark Trace is very expensive and time consuming to deploy
Hi dodge1664 - regarding your 3rd point, yes I would wholeheartedly agree. See my response to qvg below. A bit like building your own Security Operations Center or even your own Data Centre, or even your own Cloud environment - not impossible, but hard to do on your own and (very) expensive. There are many advantages to using a third part service provider rather than deploy in your own/unique environment.
bought this at 343 after listening to Keith Ashworth-Lord give a convincing explanation why he bought this share,one of only 3 for his Buffetology Fund this year. He considers this a long term hold and I am happy to continue my investment even though it’s up close to 60% in a few weeks !
hi Craigralphs, thanks for that. It seems to me a very interesting company, and I started buying a few weeks ago. How unique do you think their product / service is?
Hi qvg - I know of them and they were quite unique some time ago. They have had time to prove the technology and develop that offering over 5 or more years using the diverse customer base to re-inforce the AI and use the population as it were to correlate the data in real world scenarios in order to contextualise the relevance of what they are seeing and act accordingly.
Certainly a case of success breads success as the more customers you have, the more diverse the data, the better the results and the better the extent that you can prove the resulting actions. I note the comment from dodge1664 above, I agree. Hence the advantage of deploying using a global service provider who also acts as an intermediary and may enrich results using other proprietary software.
Can it be replicated - yes of course the technology can be, but it is the combination of product, real world experience and expertise which gives them the advantage, IMHO.
A nice and quick little earner for those that are breakout/momentum traders - I bought on 16th June (I remember that day as there were like 5/6 threads on this website just on BOOHOO - the most overrated stock pick on Stockopedia at current trading) and started selling from +20% . May be a pump and dump but keyword is Cyber Security and was mentioned on Bloomberg as one to watch (on that days spike sold a part as well).
Lots of these +/-20% short term opportunities on the FTSE.
I used to look at operating margin to see how a company was doing. Darktrace is looking like it's improving from the latest figure.
However, I now consider book value per share. That has plunged! Meanwhile, revenue is increasing, but net losses are also increasing.
I watched Boiler Room for the first time yesterday. Maybe that is colouring my judgment on Darktrace. Is it a "pump and dump"?
I don’t think of this as such. I have known of them for possibly 10 years (obviously not quite as they are now), but I also know that many FTSE100 companies have used their services albeit indirectly (via a service provider).
Are they over hyped/over valued? That I can’t say.
But I will be really interested to see Stockopedia do their thing and do a proper valuation (after 3 months? 6?) as again that is not available today.
Interested in this one also I think it came up for discussion at a Mello Monday a few weeks back by the fund manager that manages the very respected Buffetology fund. Interested to see others views on this one for sure as seems to have huge runway potential to me. Could the AI be used for alternative niches?