Darktrace Plunges After Peel Hunt Forecasts 50% Downside

(Bloomberg) -- Darktrace Plc shares plunged after a broker said the artificial intelligence-focused cybersecurity firm is worth only half its last closing value of 6.6 billion pounds ($9.1 billion).

Peel Hunt analysts including Oyvind Bjerke said in a note that some experts they consulted consider Darktrace’s product to be a “gimmick,” though others felt it offered protection in the event of a serious attack. The shares plunged as much as 27% -- the most since the Cambridge, England-based firm went public in April.

The analysts started coverage of the stock with a sell rating and a price target of 473 pence -- implying 50% downside from Friday’s close -- citing “the potential market size, the intensifying competition, and Darktrace’s limited R&D spend.”

A Darktrace spokeswoman said by email that the company’s AI “protects organizations against cyber-attacks across the full breadth of digital environments.” Customer satisfaction across its 5,900 customers is “industry-leading,” she said. 

Darktrace offers network detection and response products, known as NDR, which detect anomalies in a business’s network in order to stop malicious activity, according to Peel Hunt. However, the analysts wrote that the usefulness of Darktrace’s product is partly dependent on whether the client has capable IT professionals able to invest sufficient time on it. “If not, the value from Darktrace is low,” they said.

The stock was down 14% to 815 pence a share as of 2:07 p.m. in London, reducing the market value to 5.7 billion pounds. The shares are still more than triple their initial public offering price of 250 pence.

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