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The truth is, price target or valuation is irrelevant now as most if not all tech companies are worth lower than their lowest price target. Really, Darktrace is just a poorer relative of Nasdaq stocks with British accent. Like many Nasdaq growth stock, it has fallen 70% in value from the peak. However, it doesn't always have to be like that, Crowdstrike is holding up pretty well.
One thing that frustrate me is that the UK stocks are hit twice by the same bad news. When UK releases inflation data, market fall; then when the same is announced for US, FTSE fall another time. As we know, the high inflation will not go away as long as the war is still ongoing, thus the coming earning update plays a crucial role. After all, fund managers will have to put most of their money in stock market, and companies who show they are inflation-proof would get their attention. And I have strong faith that this will be another record breaking quarter for Darktrace which is the first quarter after Russian's invasion begun. Pretty sure a lot of companies rushed to beef up with cyber defence, we can see some evidence of countless business wins in PR release in that period.
In my view, this coming week is the best time EVER to buy Darktrace shares.
This is not a range it's stuck at ATL
smorrisjones, DARK 2021 Results give nearly 90% Gross Margin. As more customers are added, more
optimal economies of scale come into play. DARK will be highly profitable within few years. Cyber security is fast growing and DARK is in middle of it
TA1 - Thanks for you comment and I concur on your view on the use of P/E ratios and the sophistication of Mr Market.
I only used the P/E ration to try and demonstrate that any companies’ value = whether ‘value’ of ‘growth’ - will depend on future earnings, rather than just present earning as indicated by a P/E ratio. The PEG ratio is a little better but also only factors in current growth an not future possibilities.
I know of only one effective way to value a business and that is by discounting estimated future free cash flows - if not quantitatively, then conceptually and qualitatively - recognising the need to have long term sustainable competitive advantage. That is how we valued our own projects when I was in business, and the concept has served me well in evaluating potential investments. But each to their own.
One things for sure, it's not getting any bounces with the Nasdaq.
Seems to be stuck in this range for now.
Lending
“The way I see it, all companies with a P/E ratio greater than one depend on future earnings to justify their SP”
Don’t get hung up on P/Es - that’s a newcomer/novices game
All shares are valued differently depending on multiple variables.
If the market were to assign a constant p/e value to every stock they would become savings accounts.
The yanks know this - but uk investors have an over simplistic perspective on market dynamics. In my view uk markets are incapable of valuing shares fairly because of their huge intelligence deficit with the rest of the world. And a lot of that is to do with the combination of a nanny state culture and being tabloid educated.
The way I see it, all companies with a P/E ratio greater than one depend on future earnings to justify their SP. It is just that value stocks have an established history so their future earnings are more predictable.
Probably all companies start life loss making. Take by way of example a gold mine. There are costs associated with exploration and mine development consuming cash before a penny is earned. But they are valuable before they make a profit because the future cash from gold sales can be estimated. To my mind software companies are essentially no different although the future cash generation may be less certain. And Mr Market hates uncertainty especially when rising interest rates make competing investments more attractive and when the world is in a state of great stress.
If you buy into the vision of DT, buying at these prices seems to me the the right thing to do.Some on this bb have that conviction and are buying - .I applaud their approach. I would do the same but I will only allocate 5% of my portfolio to more speculative/growth stocks and this has been reached.
If DT shows it's becoming profitable it won't trade at 300 anymore, it will go over 1000. That said the market at the moment is not optimistic and is saying "show me the money" to all these fast growing non profitable companies.
I can't disagree with that. And I suspect that the downward re-rating of growth shares has some time - maybe years - to run. After all, value shares were out of favour for many years before coming back into favour recently.
It’s not pathetic its realistic. Would you pay 2 Billion for a company that’s not making profit. There’s no guarantee that they will ever make a profit like many other companies on the stock market.
So many companies are just lifestyle companies where billions are invested and never see a return. The market doesn’t respect these companies anymore. The market wants true value not falsified glory hoping valuations.
It is pathetic to think a company has zero or even negative value because it is not yet profitable. That summarises the problems with the UK - people can't see things past today's earning and have no vision for the future. That's why we don't have big tech company. Software business is a rapidly changing and winner-takes-it-all business. Trying to grow organically without raising external fund is almost certainly a suicide in this cutthroat world.
ARM will and is right to list in New York.
This company is currently far too overvalued considering its not even making an operating profit in my opinion. I’m guessing the current MCAP is heavily weighed on future positive possibilities and opportunities.