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J.P.Morgan is the only brokerage among seven to have an
"underweight" rating, the equivalent of a "sell" rating, on the
company's shares.
Darktrace's stock fell nearly 8% to 416p, the lowest in more
than a month.
The company's latest forecast implied a year-on-year increase in
net constant currency annual recurring revenue (ARR) of between
24% and 29%, versus previous forecast of 19% to 24%.
"With ARR growth tied to new customer acquisitions, we believe
that higher customer acquisition and retention costs are likely
to challenge the company's ability to deliver profitable
growth," J.P.Morgan analyst Varun Rajwanshi said.
Darktrace earlier this month raised its full-year revenue and
margin outlook, reflecting strong customer growth and retention.
A push by Microsoft Corp, Amazon.com Inc and Alphabet Inc's
Google in cloud traffic and email security poses a threat to
Darktrace, Rajwanshi said.
"A growing list of vendors that seek to combine different point
security solution offerings ... will only increase the
competitive intensity for Darktrace, whose (cybersecurity)
offerings are a complement (rather than a replacement),"
according to the J.P.Morgan note.
The brokerage expects the sum of revenue growth and free cash
flow margins to remain below 40% over the next couple of years
and in turn push Darktrace's valuation below that of its peers.
(Reporting by Siddarth S and Tanvi Mehta in Bengaluru; Editing
by Shounak Dasgupta)
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