- Darktrace has big companies like Peugeot, T-Mobile, and Toyota on its client list
- The cyber security company’s share price soared post-IPO and rose by more than 250% within a few months
- Darktrace is holding back on its investment in R&D
What is Darktrace all about?
Darktrace (LSE:DARK) is a cyber security service provider so it’s not surprising that its share price garnered a lot of attention recently. The company makes use of AI and unsupervised machine learning to combat cyber-attacks. Each of these technologies has been developed in multiple variations. As a result, the company can practice precision and vigilant monitoring to detect cyber threats for its clients.
Darktrace is a global entity today. The company has received multiple awards and recognitions for technology innovation leadership and cloud computing. Also, the cyber-security firm majorly focuses on businesses and has an impressive portfolio of companies. Some high-profile clients’ names include Peugeot, T-Mobile, and Toyota amongst the 400 plus client list.
Can the Darktrace share price rise further?
The Darktrace share price has been on a rollercoaster ride since its IPO on 30 April 2021. The fast-paced growth elevated the company to the FTSE 100 very soon after its IPO. Within six months of going public, Darktrace’s share price touched 945p, representing an increase of more than 250%. But very soon, the company lost almost 25% of its valuation following a statement from analysts at Peel Hunt. As a result, the company was withdrawn from the FTSE 100 index.
Going forward, the question arises will the Darktrace share price recover to its 2021 high?
Well, in my opinion, the stock has immense growth potential. Why do I believe this? The strong growth exhibited in the half-yearly 2022 report backs my opinion. The 53% year-on-year revenue growth and the 40% increase in customer base coupled with the accuracy of its threat detecting services are encouraging evidence, in my opinion.
Challenges on the road towards growth
The cybersecurity industry was valued at $156.24bn in 2020, and it is expected to reach $352.25bn by 2026, as per Mordor Intelligence Industry Reports. And with low barriers to entry, the only thing that can drive Darktrace towards growth is by staying ahead in the race of technological innovation. No doubt, the cybersecurity firm has been credited in this field in the past. And it is also reflected in the soaring Darktrace share price post IPO. But what I am concerned about is the low investment in R&D.
In the half-year 2022 report, the company reported roughly 8% of sales revenue invested in R&D. No doubt, the overall R&D expense has risen by almost 50% year-on-year. But to stay ahead of the game in ever-evolving cyberspace, innovation is the key.
Will I be investing in Darktrace shares?
Absolutely! A company with such a high-profile client base and exponential growth potential is a gold mine, in my experience. In fact, if the company maintains its current growth, the effect on Darktrace’s share price will earn multi-fold returns to investors, in my opinion. Moreover, the recent news of the world’s largest semiconductor company renewing its contract with Darktrace proves the value addition Darktrace’s AI-powered technology brings to the industry.
What’s more, the recent acquisition of Cyberprint, a cyber-attack surface management firm, will provide an all-rounded service to customers. As a result of this acquisition, Darktrace will be able to improve its service by focusing more on blind spots prone to cyber-attacks.
While this is undoubtedly a riskier investment, the potential rewards make it worthwhile for my personal portfolio.
Learn more about Darktrace shares
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Saima Naveed does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned at the time of writing. Views expressed on the companies and assets mentioned in this article are those of the writer and therefore may differ from the opinions of analysts in The Money Cog Premium services.
