Tech stocks try to fight back, Darktrace soars, and Games Workshop still having a spot of bad luck

“Shares in Darktrace enjoyed a double whammy of raised earnings guidance and a small recovery in the broader technology sector following a big sell-off in recent days,” says Russ Mould, Investment Director at AJ Bell.

“The company has attracted its fair share of critics in recent years, but this cyber security juggernaut keeps on trucking with significant customer and revenue growth.

“It has been focused on cross-selling services to existing clients, thus making them more reliant on Darktrace’s ecosystem which in turn could be a key reason why churn rates are easing. It has also been successful at signing up lots of new customers.

“Scottish Mortgage Investment Trust was among the other UK-listed technology-related stocks trying to push ahead on the markets on Tuesday. Its shares jumped 3% following recent weakness caused by concerns of how rising interest rates would affect valuations for fast-growth stocks, many of which populate Scottish Mortgage’s portfolio.

“In the US, the tech-heavy Nasdaq index is down nearly 6% year to date, but yesterday’s session saw investors start to buy on the dip meaning that losses earlier in the day were eventually clawed back by the market close.

“It might be too early to call the start of a proper recovery for tech as pre-market indicative prices show minimal gains in the Nasdaq on Tuesday. Investors are likely to be waiting for US inflation figures tomorrow before committing to any big trades on the market.

“The consensus forecast is for inflation to have hit 7.1%, meaning all eyes will be on the Federal Reserve and how quickly it plans to take action to try and curb the high cost of living.”

Games Workshop

“Stock market high-flier Games Workshop has come up short after it revealed a drop in first half profit for the six months to 28 November 2021.

“The fantasy miniatures firm has lost some of its momentum in recent months as it has struggled to keep up with the market’s elevated expectations amid global supply chain disruptions and higher costs.

“And while the company says it is performing in line with expectations there may be some nervousness now that its second half isn’t sufficiently heroic to make up for a limp first half.

“Potentially more serious have been reports of fractures between Games Workshop and its devotees, linked to the launch of a subscription-based service and the aggressive protection of its intellectual property by pursuing YouTubers who have created Warhammer-inspired animations and stories.

“While it is understandable that Games Workshop is protective of its IP, it needs to tread carefully. The value of the company is inextricably linked to fans’ devotion to the Warhammer brand.

“It is notable in today’s results that Games Workshop is planning to launch a community outreach team to support fans in creating user-generated content and potentially mend some fences with the fanbase.

“Key areas of excitement for the business longer term are the licensing and royalty opportunities associated with video games as well as TV and film productions. These revenue streams are highly profitable as they typically involve limited costs for Games Workshop itself.

“Games Workshop is already fairly advanced on the video games front, however, comments from the company that it remains ‘ambitious and patient’ when it comes to media and entertainment opportunities suggests this area won’t see an overnight success.”

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