Darktrace Share Price Forecast December 2021 – Time to Buy DARK?
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Shares of British-American information technology company Darktrace (LSE: DARK) are in the red today, after closing at £411.2p as of December 24th (17:51 GMT). Since Darktrace came into existence, DARK shares have attracted plenty of negative attention. Some of the complaints towards the company include its opaque business practices and high valuation.
Darktrace – Technical Analysis
According to the financial statement released by Darktrace, the company has a £2.866 billion market cap with £402.052 million worth of total assets. Revenue for 2021 was at £209.13 million with a profit margin of -53.17% compared to £158.12 million in 2020.
Moving averages such as Exponential Moving Average (20)(435.0), Simple Moving Average (20)(419.1), Exponential Moving Average (30)(468.0), Simple Moving Average (30)(451.5) and Exponential Moving Average (50)(524.3) are indicating a sell action. On the other hand, Relative Strength Index (14)(38.2), Stochastic %K (14, 3, 3)(62.8), Commodity Channel Index (20)(−29.3), Average Directional Index (14)(48.1) and Awesome Oscillator(−59.7) are neutral.
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Recent Developments
Darktrace uses AI-based models to help identify and stop cyberattacks before they can cause too much damage. The company was priced at 250p at its IPO and went as high as 1,003p per share earlier this year. However, things started to change in October. The first hit occurred after analysts at Peel Hunt questioned whether the company was really worth its multi-billion pound valuation. Their target price was decreased to just 473p due to the company’s growing competition and Darktrace’s low R&D spending.
As the post-IPO lock-up period came to an end and original investors jettisoned their holdings, the downward pressure on the share price continued. Records revealed that some board members were also active sellers with non-executive director Vanessa Colomar pocketing over £8 million in November.
Regardless of the performance of the share price, it is clear that Darktrace is performing well. The company’s Q1 trading update for October indicated that revenue increased 50.8% to reach $93.1 million compared to the previous year. Darktrace now expects a FY22 growth of between 37% and 39%. A quick look at Darktrace’s customer list will reveal that the firm is still growing. Darktrace counts governments and multinationals as clients and had 5,600 customers, up 42% year-on-year, at the end of its last fiscal year.
Should You Buy DARK Shares?
Investors need to be aware of some of the risks associated with DARK. These include keeping ahead of the hackers and fighting off competition from larger peers with deeper pockets. The firm’s reputation can take a hit if it starts struggling and hackers begin to break through its defences. This is the biggest risk any cyber security firm faces.
Darktrace is somewhat in a tricky spot right now. While the news regarding the company was more positive on this company compared to fellow 2021 IPO stock Deliveroo, many analysts believe that its unprofitable status could haunt it going into 2022. This is especially true in a market where traders are nervous about the pandemic and the threat of interest rate increases.
At current share price levels, Darktrace looks cheap and is growing at a high double-digit rate. Along with that, it is still a relatively young public business, and it needs to build the market’s trust. Despite the above risks, investors can add DARK shares to their portfolios for the next year. Darktrace’s growth potential and unique business model are desirable qualities with only a handful of other businesses having the same potential for the year ahead.
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