Darktrace share price is rising: How high can the stock go?

Darktrace (LON: DARK) share price has been one of the top performers in the FTSE 250 this week. It jumped to a multi-month high of 388p on Wednesday as investors cheered the company’s results and a report by its auditor.

Darktrace growth accelerating

Darktrace is a leading company that provides cybersecurity and artificial intelligence solutions to companies from around the world. The company has been under pressure in the past few months after a short-seller questioned its accounting standards. 

These concerns ended on Tuesday when Darktrace published an audit report by EY, its auditor. The report concluded that the company’s accounts were up to standard. It also established that the previous audit by Grant Thornton was correct, as we wrote here.

At the same time, the company’s preliminary results were better than estimates. The company believes that its FY’23 revenues will rise by 31% YoY to over $544 million. Its number of customers grew by 18% while the annual recurring revenue rose to $625 million. Darktrace now has 1,362 customers afte it added 396 of them in the fourth quarter.

These results and the audit report mean that the company is doing well and having stronger growth than other cybersecurity companies. For example, Palo Alto Network’s revenue grew by 24% in the last quarter while Fortinet grew by less than 28%.

Most importantly, there is a likelihood that the company could become a takeover target now that its accounting questions have been handled. Last year, Thoma Bravo, an American private equity company ended talks to acquire the company. More PE firms, including Thoma, could make another bid.

Also, the audit report could see the company add more customers in the coming months. I believe that the short-seller report and the allegations pushed away some potential customers.

Darktrace share price forecast

DARK chart by TradingView

DARK stock price made a strong bullish breakout after the company published a strong trading statement. As it rose, the shares moved above the ascending channel shown in black. It also rose above the important resistance level at 352p, the highest point on June 15th.

Darktrace shares have moved above the 50-day and 100-day exponential moving averages. The Relative Strength Index (RSI) has moved to the overbought level. Therefore, the shares will likely continue rising as buyers target the key resistance level at 415p (November high).