Analysts have raised Darktrace (DARK) profit forecasts ahead of annual results set to be published on 6 September. Having revisited the investment case, Liberum has upgraded 2023 adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) estimates by 14%, and nudged full year 2024 and 2025 adjusted EBITDA higher.

Describing Darktrace as the ‘Marmite’ of the UK tech sector, Liberum has been impressed with recent trading, believes the cybersecurity group’s products have got better over time and sees strong tailwinds for demand from rising cybercrime and new regulation.

The broker estimates that cybersecurity has doubled as a proportion of corporate IT spend over the last three years. ‘We have upgraded our adjusted EBITDA estimates by 14%, 5% and 4% for full year 2023, 2024 and 2025 respectively, having previously been 5% ahead of consensus,’ it says.

This largely reflects the guidance given in a trading update on 18 July, when Darktrace stated that it expects revenue of $544 million and an EBITDA margin of no less than 22%, compared to previous margin guidance of 19%, in 2023.

In July, Darktrace was given a clean bill of health after accounting firm EY was instructed to run an independent audit of its books. That news, combined with the trading update, propelled Darktrace shares nearly 30% higher across two days of high-volume trading.

Darktrace came under fire at the start of 2023 from New York-based short seller Quintessential Capital Management, an attack that had dragged on the share price for most of this year. That led to the EY report being commissioned.

The EY report flagged several areas where improvement work was needed, but nothing that would impact previous financial statements, nor anything to slow Grant Thornton’s audit of the financial year to 30 June 2023.

‘EY reported several areas where systems, processes or controls could be improved around its channel processes and controls, where it identified a small number of errors and inconsistencies,’ said Tom Kennedy, an analyst at Megabuyte.

Kennedy reflected that the report could have wider implications on broader market murmurings that ‘something wasn’t quite right’ at Darktrace. The investigation into the firm’s finances ‘has essentially proved that the cybersecurity expert doesn’t have any skeletons in the closet,’ said the analyst, and Liberum now seems to agree.

Liberum’s latest calculation suggest nearly 30% upside could be on the cards from Darktrace shares over the next 12 months, from the current 349p to its new target of 440p.

Palo Alto (PANW:NASDAQ), the world’s second largest cybersecurity vendor, saw its share price rise 15% on 21 August after reporting fourth quarter results which included a deep dive into its industry, noting that the number of cyber attacks and malicious programs is still on the rise.

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