Berenberg hikes target price on Darktrace following Q3 results

Analysts at Berenberg raised their target price on software and services firm Darktrace from 600.0p to 630.0p on Thursday after the group's third-quarter results earlier this morning demonstrated a continuation of "strong momentum" seen in Q2.

Berenberg noted that annualised recurring revenues had grown 23.5% year-on-year to $731.1m, with $29.0m of net annual recurring revenues added in the quarter – up 6.2% year-on-year.

"We think that this is particularly significant within the context of negative yoy changes in net ARR added in Q1 (-22%) and Q2 (-4%)," said Berenberg, which has a 'buy' rating on the stock.

The German bank added that the company also upgraded its growth and margin outlook for the third time in three months, leading the analysts to increase its ARR, revenue and adjusted underlying earnings forecasts in response.

"In our view, Darktrace remains poised to outperform, given: a) its ongoing potential to exceed growth and margin expectations; b) that it has sufficient growth and operating leverage to drive a c30% FY23- FY26 CAGR in free cash flow per share; and c) the fact that it warrants a multiple rerating – at 4.4x CY24 EV/sales, it trades at a c60% CY24 EV/sales discount to US peers," said Berenberg.

"Darktrace trades on 4.4x CY24 EV/sales, c60% below our US peer group, despite similar expected sales growth and higher expected margins."

Reporting by Iain Gilbert at Sharecast.com