Darktrace Share Price: Bearish But Inverted H&S Gives Hope

Darktrace share price has been under intense pressure in the past few weeks as concerns of its acquisition rose. After soaring to 580p in August, the stock has crashed by more than 37% to the current 350p. It has plummeted by more than 64% from its highest level on record, giving it a market cap of over 2.55 billion pounds.

Darktrace is in trouble

The cybersecurity sector has seen substantial growth in the past few years as risks soar. Studies estimate that cybersecurity revenue soared to more than $159.8 billion in 2022 and analysts expect that it will have a compounded annual growth rate of 13% by 2027. As a result, cybersecurity stocks have soared in the past few decades. 

Most cybersecurity stocks are from the United States and they include companies like Palo Alto Networks, CrowdStrike, and Fortinet among others. To a large extent, Europe has lagged the broader sector, with no company being in the top 20 globally.

Darktrace is the biggest European cybersecurity company and is the 23rd biggest one globally. Its products include DarkTrace Prevent, DarkTrace Detect, DarkTrace Respond, and DarkTrace Heal. All these products aim to use artificial intelligence to detect and prevent attacks. 

Over the years, the company has gained multiple customers, mostly in Europe. Some of the most notable clients are firms like McClaren Group, Drax Group, and Funding Circle among others. It has over 7,400 customers.

In 2021, DarkTrace had a 42.6% annual run rate growth while adjusted EBITDA margin rose to 22%. Its revenue rose by 42% as demand for cybersecurity products rose. Revenue rose to $415 million while contract backlog increased to $1 billion for the first time ever. At the same time, churn dropped to just 6.5% while retention rate rose.

Still, Darktrace share price has not done well over the years. The most recent dump happened after Thoma Bravo ended its pursuit for the company. Due to rules by the UK government, Thoma Bravo cannot make a bid for the company in the next six months unless a competing bid comes up. 

It is highly likely that Darktrace will not attract any bids in the coming months. Besides, the company has a relatively dark reputation. For example, its biggest shareholder is wanted in the United States following criticism of his Autonomy sell-off to HP.  

Darktrace share price forecast

darktrace share price

The daily chart shows that DARK share price made a major bearish breakout in September after its acquisition bid ended. It is yet to fill that gap. At the same time, the stock has moved below the 25-day and 50-day moving averages. 

A closer look shows that the stock has formed an inverted head and shoulders pattern, which is usually a bullish sign. Therefore, while the overall trend is bearish, there is a likelihood that it will crawl back soon. If this happens, the next key resistance to watch will be at 400p.

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