FTSE 250 tech pair rocket on results day
Both these companies still trade at a big discount to their peak level but are certainly in a much better place now. City writer Graeme Evans explains why they’ve done so well and reveals latest share price targets.
11th January 2024 15:43
by Graeme Evans from interactive investor
Trustpilot Group (LSE:TRST) and Darktrace (LSE:DARK) flew the flag for London’s technology sector today before fading hopes of a March cut in US interest rates weighed on stock market sentiment.
Consumer reviews platform Trustpilot was up as much as 26% briefly on Thursday at 184.9p. It’s now up over 150% since July after it announced plans for a £20 million share buyback alongside upgraded earnings guidance.
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AI-based cybersecurity business Darktrace was next on the FTSE 250 index risers board, lifting 10% to 370p after its second-quarter performance boosted City confidence following a slow start to its financial year.
Both stocks listed in 2021, with Trustpilot still below its 265p starting point, having slid from an initial level above 400p in the early months of its listing.
The recent signs have been more promising for the Copenhagen-based firm, which is back in the FTSE 250 after a series of earnings upgrades on growth and margin momentum.
It now expects adjusted earnings to be above the top end of market forecasts and for it to record a year-end $91 million (£71.6 million) of cash with no debt.
City firm Berenberg believes the current valuation offers an attractive entry point as it hiked its 2024 earnings forecast by 48% and lifted its price target from 160p to 200p.
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It pointed out that FTSE 250 status will provide a tailwind from index buying, with the free float of shares now 78% following a number of non-institutional holders selling down.
Analysts at JPMorgan Chase have a price target of 195p, while Morgan Stanley said the company continued to demonstrate its ability to drive profitable growth.
Darktrace shares are above their IPO price of 250p, but they had been over 800p in the early months of their listing.
Today’s rally came as the company reported annual recurring revenues of $702 million (£552.3 million), a first-half growth rate of 24% and slightly ahead of consensus.
Guidance for the year has narrowed to a range of 21.5% and 23% from 21%-23%, raising its midpoint expectation by approximately $1.6 million (£1.3 million). It ended the first half with 9,232 customers, meaning year-on-year growth of 12.9%.
UBS, which has a price target of 400p, said the small upgrades to guidance in today’s update will be well-received after a slow start to the financial year.
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Darktrace and Trustpilot were the standout performers in today’s FTSE 350 session, alongside smaller improvements in the mining sector after Deutsche Bank raised its long-term estimate on the price of copper.
It also hiked Chile’s Antofagasta (LSE:ANTO) from 1,400p to 1,450p and reiterated a “buy” recommendation on Anglo American (LSE:AAL) through a new estimate of 2,700p.
The pair featured on the FTSE 100 risers board, but other miners struggled after hopes for a near-term cut in US interest rates were dashed when the country’s inflation rate rose by more than expected to 3.4% in December.
Futures markets had been pricing a 69% likelihood of a Federal Reserve rate cut by March, helping the Magnificent Seven to enjoy another strong session on Wall Street last night.
However, the S&P 500 index opened in the red today, while the FTSE 100 index moved from an unchanged position to approach the closing bell about 45 points lower.
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Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.