Jefferies rates Darktrace at 'buy' following Q3 statement

Jefferies stated Darktrace's quarterly update indicated that annual recurring revenue growth was 46.3%, while overall revenue growth was 50.1%, supported by 37% growth in customer numbers, suggesting broad-based and sustainable growth. The investment bank highlighted that faster ARR growth than customer growth implied higher ARR per customer.

Meanwhile, Jefferies, which has a 730.0p target price on the stock, noted that the statement revealed that gross margins, ARR churn, and net ARR retention rates were consistent with prior periods, resulting in what the analysts called "a very balanced quarter, with strong momentum".

"Coming off restriction, we update our numbers for the positive 3Q22 trading statement which leads to yet another upgrade to FY22 guidance. ARR and revenue growth guidance is raised by c.1%-1.5%, while there is a meaningful upgrade to EBITDA margins from 11% to 16% (at the midpoint)," said Jefferies.

"We think this clearly highlights the operational leverage which is inherent in the business model. Darktrace remains one of our favoured names in the sector."