Darktrace Plunge Driven by ‘Fear Not Fact,’ Berenberg Says

(Bloomberg) -- A new research note has defended Darktrace Plc, the U.K. cybersecurtity firm whose shares have plummeted since a broker recommended selling the stock last month.

“Any share price capitulation is a result of fear not fact,” Berenberg analysts including Benjamin May wrote after visiting the company’s headquarters in Cambridge, England. Berenberg, which provides corporate broking services to Darktrace, has a buy rating on the stock.

The argument that the firm is underspending versus peers is ignoring important context, including the fact that salaries for software engineers are lower in England than on the U.S. west coast, the analysts said. Customer retention rates are also set to improve as sales teams increase their focus on customer needs, in order to upsell other products, they added.

Darktrace stock rose as much as 13% on Monday, extending an earlier gain after a filing showed Chairman Gordon Hurst bought 25,000 shares at a premium on Friday. The stock is now down about 32% since Peel Hunt said Oct. 25 that it was worth only half its value at the time, but is still well above April’s 250-pence-a-share initial public offering price.

Peel Hunt warned that some experts had suggested the company’s artificial intelligence-focused product was a “gimmick.” Darktrace said in response that its product does provide protection and that customers are satisfied.

The stock has also been pressured by the end of a lockup period that allowed early investors to sell shares.

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