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This FTSE 250 AI cybersecurity company is up 109% in 12 months

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Darktress (LSE:DARK) has quite a unique position. FTSE 250. It offers AI tailored specifically for cyber security, even providing autonomous responses to threats.

The company is relatively new, founded in 2013 with its initial public offering due in 2021. Up 109% in just 12 months, I think these shares have the potential to grow massively over the next decade. Here’s why!

Competition for top customers

I’ve given a lot of thought to the future of cybersecurity, and there’s a lot of competition. For example, Crowd strike, Palo Alto NetworksAnd Cisco All are leading global AI cybersecurity efforts.

That being said, Darktrace is still in the right market. With more growth for the field in general, management only needs to ensure that they retain their customers for a long period of time. At that time, some of them McLaren, Steve Madden, Aston Martinand many other prestigious firms.

A flourishing finance

Over the past three years, the company has managed to average a 41% revenue growth rate. That’s astronomical, though not unusual for a new company in a high-growth field like AI.

Also, the company reported its first profit in 2022, which is great news. With early-stage companies, it’s often the case that savvy investors acquire early. Once earnings begin, the general market seizes the opportunity. That’s a big contributor to why share prices have risen 109% over the past 12 months.

The AI ​​market is just getting started.

I think one of the reasons artificial intelligence is such a sensible place to invest is because the consequences for society will be so obvious. The use of technology should lead to higher margins in almost all industries.

In cybersecurity, companies will face new levels of attacks with advanced capabilities. These will include those powered by quantum computing and AI. Therefore, organizations not only need but need to implement state-of-the-art cybersecurity in their digital operations. Any breach can cost you more in reputation and revenue than the cost of hiring a company like Darktress.

However, Darktrace’s market cap is only around £4bn. Compared to the most dominant cyber security provider, CrowdStrike, which has a market cap of around $76bn, I’m a little worried that Darktrace won’t be able to sustain itself for the long term. AI is very expensive to develop, operate and maintain. There are companies with the most money to invest in that can potentially get the best products and services.

Investing is about psychology.

Some people are holding off on investing in Darktrace or other cybersecurity firms because the price-to-earnings (P/E) ratio is higher than normal for many of these companies. Darktrace, in particular, has a P/E ratio of around 42, and the average for the FTSE 250 is around 14.

The thing is, a company can maintain a high price for decades in some cases. It’s all about demand.

The real concern is that expectations are high. If management doesn’t meet them, investors may sell faster and more aggressively than usual because the price is too high.

Anyway, I’ve added Darktrace to my watchlist! This could be a big growth story.


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