Darktrace tumbles as Peel Hunt starts coverage at 'sell'

Cybersecurity firm Darktrace tumbled on Monday after Peel Hunt initiated coverage of the stock at ‘sell’ as it took "a more grounded approach" to the valuation.

Peel Hunt noted that the company has experienced an average annual returns compound annual growth rate of 49% over FY18-21.

"Its growth has been driven by its powerful go-to-market strategy, targeting the need for companies to strengthen their cybersecurity defences," the broker said.

"While we believe strong growth rates will continue, we also see a disconnect between the valuation and the ultimate revenue opportunity.

"Having considered the potential market size, the intensifying competition, and Darktrace’s limited R&D spend, we take a more grounded approach to our valuation, giving a target price of 473p."

Peel said this implies 50% downside.

At 1050 BST, the shares were down 20% at 752.50p.