Why Okta Stock Lost 22% in September

A good earnings report wasn’t enough to maintain intense investor enthusiasm for this high-growth stock.

| More on:
Chalk outline of two arrows pointing in opposite directions

Image source: Getty Images.

What happened

Okta (NASDAQ: OKTA) investors lost ground to the market last month as the stock declined 22% compared to a 2% increase in the S&P 500, according to S&P Global Market Intelligence. The drop removed only a small portion of the tech stock‘s outperformance, though, and shares remain higher by over 80% so far in 2019.

So what

September’s swoon followed strong third-quarter earnings results by the identity-management software specialist that nevertheless disappointed some investors. Okta revealed in late August that sales jumped 49% to again blow past management’s guidance. The company remained in net loss territory but improved its cash burn to $1 million, or 1% of revenue from $5 million, or 6% of revenue last year. Investors may have focused on those losses in choosing to sell the stock last month, and that pressure appears to have been increased by a new debt issuance.

Now what

CEO Todd McKinnon and his team are as bullish as ever about the long-run growth opportunities available as more data moves online and requires better digital identity management. Accordingly, they lifted their 2019 growth outlook for the second straight quarter. Still, investors are likely to see more volatility in this stock, up or down, since it is priced at a premium that reflects plenty of optimism about the business.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Demitrios Kalogeropoulos owns shares of Okta. The Motley Fool owns shares of and recommends Okta. The Motley Fool has a disclosure policy.

More on Tech Stocks

Family relationship with bond and care
Dividend Stocks

TFSA Investors: 3 Cheap Canadian Stocks for Retirees

These three Canadian stocks are super cheap for retirees looking for a great buy that will last the test of…

Read more »

consider the options
Tech Stocks

Better Buy (2024 Edition): Shopify or Nvidia Stock?

Shopify (TSX:SHOP) isn't the only red-hot tech stock in town that could add to recent gains.

Read more »

Illustration of bull and bear
Tech Stocks

A Bull Market Is Coming: 3 Growth Stocks That Could Thrive

Given their high growth prospects and cheaper valuation, these three growth stocks would be an excellent buy as the market…

Read more »

online shopping
Tech Stocks

2 Stocks That Saw Major Black Friday Boosts

These stocks saw a pretty amazing Black Friday, a sign that both are probably going to be a great buy…

Read more »

Growing plant shoots on coins
Tech Stocks

2 Top Growth Stocks in Canada for December 2023

Here are two of the best Canadian growth stocks you can buy in December 2023.

Read more »

Dots over the earth connecting the world
Tech Stocks

Is Constellation Software Stock Worth a Buy in December?

Constellation stock (TSX:CSU) is up 46% in the last year alone, but after an earnings miss should investors still consider…

Read more »

Man data analyze
Tech Stocks

Beyond SPY Stock: Top U.S. Picks for Canadian Investors

Venturing beyond SPY stock opens up a world of investment possibilities for Canadian investors. Top U.S. picks include Apple.

Read more »

edit Colleagues chat over ketchup chips
Tech Stocks

Is Now the Right Time to Buy Tech Stocks Trading Cheaply?

Tech stocks are still cheap across the board, but these two are the best of the best in my view,…

Read more »