The Darktress (LSE: DARK) Share prices rose more than 50% in just six days in September, after cybersecurity experts reported a strong set of full-year numbers. But profits could not be sustained and Darktress shares are now trading near 20% of the record high of 1,003p seen on September 23rd.
Why am I interested
I’ve been wary of Darktress shares before. This business is still making losses and the big competitors have no scale or profitability. But I’m impressed with the firm’s recent results and gaining confidence. I am now thinking of opening a starter position in this stock.
Cyber security is a fast growing area. Most existing systems focus on identifying known threats and blocking them. The problem with this is that new forms of attack are constantly emerging. Keeping up with this is a difficult challenge.
Darktress is taking a different approach. Using artificial intelligence, the company’s systems aim to understand what is normal in your network – and what is not. Theoretically, this would help Darktress to stay ahead of potential attacks without the need for constant updates.
A revolutionary solution?
Darktress a “Disease Management”. The idea of a defensive, automated system certainly seems promising to me. Customers also seem interested. The total number of subscribers increased by 45% last year to 5,605, run-rate revenue increased by 46% to 343.5 million
Each client appears to pay an average of $ 61,280 per year for Darktress’s services. This suggests to me that the company’s target market is small and medium-sized companies.
If I’m right, I think there could be a long hike runway in front of Darktress. The company says it has identified more than 150,000 companies that could potentially benefit from its technology. Winning a small fraction of this will see the business double or triple the size again.
What could be wrong?
As a technology fan I am interested in Darktress stories. But as a potential investor I still see some real risk.
One concern is that this is a relatively new and unproven business. Darktress was founded only in 2013. It earned just 28 281 million last year, which reported a net loss of 150 150 million.
It is not yet clear to me how loyal the customer is to Darktress’s system. The company says its average contract length is three years. In the last financial year, .7.% Of existing customers have gone.
I think Darktress still has a lot to prove. But I’m excited to see progress so far. I am also happy that the company is investing more in R&D as well as marketing.
Darktress share price: My verdict
I don’t know if Darktress will succeed in becoming a mainstream player in the cyber security sector. But I have seen enough to think that it could be a winner in the future.
In such situations, I take a phased approach to investing. I would be happy to buy a small number of Darktress shares today. I would then like to learn about the business and continue to monitor its performance.
Over time, I will buy more shares or sell my holdings depending on my outlook on the future of the company. This approach will help me limit my potential losses, while benefiting from the company’s growth.
Roland Head has no position on any of the shares mentioned. Motley Flower UK has no position on any of the shares mentioned. The opinions expressed in the companies mentioned in this article may differ from those of the authors and therefore the official recommendations we make on our subscription services such as Share Advisors, Hidden Winners and Pro. Here at The Motley Flower we believe that considering a variety of insights makes us a better investor.