Darktrace spent the end of 2021 under a cloud. The London-listed cyber crime fighter’s shares lost more than three-fifths of their value in under three months. But on Tuesday, they jumped by a tenth after the FTSE 250 company lifted its guidance for the full year. With the promise of at least 42 per cent revenue growth and higher margins, Darktrace should now be able to move out of the shadows.
Factors behind the slump in its valuation included insiders’ share sales — though founding shareholder Mike Lynch, who is fighting US extradition over fraud charges, held on to his. More significant was a bearish broker note from Peel Hunt in October, which estimated that the shares were overvalued by 50 per cent. It cited concerns about the size of Darktrace’s market, intensifying competition and its limited research budget. Some customers compared certain products to snake oil, it said.
Now that the air has escaped from the valuation, Peel Hunt no longer recommends clients sell the shares. Indeed, Darktrace’s enterprise value of 8 times forward sales does not look expensive compared with US peers on multiples several times higher.