Darktrace Share Price Forecast August 2021 – Time to Buy DARK?
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Shares of British American AI company Darktrace (LSE: DARK) have closed at 640p (August 6th 18:40 UTC+1), continuing its dip. Since the start of its IPO in April, prices for the young cybersecurity tech company have been rising over 100%, before dropping by almost 10% since the end of July. Many investors are wondering whether this dip in share price is a buying opportunity.
Darktrace – Technical Analysis
From the financial statement released by Darktrace, we see that its total market capitalisation is at £4.465 billion with total assets worth £217.518 million. Revenue for Darktrace in 2020 was at £158.12 million with a profit margin of -14.40% which is up from £105.87 million earned in 2019. The total debt to assets percentage is at 89.79%.
Moving averages for Darktrace such as Exponential Moving Average (30)( 625.6), Simple Moving Average (30)(618.0), Exponential Moving Average (50)(554.7)and Simple Moving Average (50)(529.9) are pointing towards buying. On the other hand, oscillators such as Stochastic RSI Fast (3, 3, 14, 14), Williams Percent Range (14)(−76.6), Bull Bear Power(−91.0) and Ultimate Oscillator (7, 14, 28)(44.9) are all neutral.
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Recent Developments
The revenue for UK cybersecurity companies has been steadily rising which is great news for Darktrace. The estimated revenue for cybersecurity in the UK reached £5.7 billion in 2017, growing to £8.3 billion in 2019 and £8.9 billion in 2020. This accounts for a 56% increase in spending from 2017 to 2020.
Recently some major stakeholders of Darktrace such as KKR Dark Aggregator LP, Summit DT CLN Holdings 4, Hoxton Ventures Fund I Opportunities III LP and Balderton Capital SFI SLP have decided to sell shares worth $150 million to institutional investors. The total number of shares and price of each share will be determined before the book building process closes, with Darktrace receiving no proceeds from the placing.
Investment in the cybersecurity sector will only grow as four out of ten companies on average experienced cyberattacks between March 2020 and 2021. Darktrace itself ended up with almost 5600 customers in FY21 and the company estimated an annualised recurring revenue of at least $354 million for FY22. This outpaces its competitors like Crossword Cybersecurity and Okta. Thus Darktrace share price displays certain characteristics that may drive up share prices higher in the future.
Should You Buy DARK Shares?
Before investors decide on picking up DARK shares, they must consider some risks. The first is the dip in share price. This was largely due to the trading report released by the company on July 15th which shed light on its FY21 performance and FY22 expectations. Instead of profits, Darktrace incurred an operating loss of $25 million. Many investors have thus turned bearish on the stock making the share price extremely volatile for the years to come. Many investors are also concerned about which direction the business will develop as these are still early days. The Darktrace share prices also took a hit when it was revealed that Mike Lynch, a shareholder, is facing fraud charges in the United States.
However, analysts agree that DARK shares won’t face uncertain times ahead especially if the company uses outside funding to adjust losses. Investors are mostly waiting to see if the shares live up to their expectations. The company’s services are attracting a lot of customer demand. Product systems provided by Darktrace can easily be adapted by AI cloud companies and big corporations in addition to small and medium scale companies. Considering all of the above points, DARK shares will be a good addition to any investor’s portfolio.
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