Skip to main content

Appian Corp Cl A(APPN-Q)

Today's Change
Real-Time Last Update Last Sale Cboe BZX Real-Time

Why Okta Stock Plunged Today

Motley Fool - Fri Nov 4, 2022

What happened

Shares of Okta (NASDAQ: OKTA), the cloud-identity software company, took a dive today on a bearish analyst note and as several other cloud stocks issued disappointing earnings reports.

The stock closed down 10.2% on Friday.

So what

In a note this morning, Morgan Stanley analyst Hamza Fodderwala lowered his price target on Okta from $93 to $65 and maintained an equal weight rating on the stock. Fodderwala cited execution challenges and a worsening macro environment, and also said he didn't think the company would present updated financial targets at next Wednesday's Investor Day conference or that the conference would be a catalyst for a recovery.

Separately, several cloud-software stocks offered disappointing earnings reports that included warnings about the macro environment. Among the software stocks heading south today were Twilio, Atlassian, Appian, and Cloudflare, and although Twilio and Atlassian were the only two of the four to lower their guidance, pessimism swept the software sector as many investors still believe these stocks are overvalued, especially as many of them are unprofitable.

Now what

Weak guidance from Twilio or Atlassian doesn't necessarily impact Okta, as these companies aren't direct competitors. Okta also already sold off sharply on its most recent earnings report as it pulled its long-term guidance, meaning the worst for the stock may already be out there.

However, it's clear that the macro environment is impacting the software sector, and that is continuing to weigh on valuations. Okta management said in its latest earnings report that it was starting to see longer sales cycles, a sign that customers were getting more cautious.

Still, its cloud software is an essential tool for logging in securely and staying connected, and businesses need to have an identity solution. We should learn more about its prospects at the Investor Day conference next week, and Okta's third-quarter earnings report is due out at the end of the month.

10 stocks we like better than Okta
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

They just revealed what they believe are the ten best stocks for investors to buy right now... and Okta wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of September 30, 2022

Jeremy Bowman has positions in Okta and Twilio. The Motley Fool has positions in and recommends Appian, Atlassian, Cloudflare, Inc., Okta, and Twilio. The Motley Fool has a disclosure policy.

Paid Post: Content produced by Motley Fool. The Globe and Mail was not involved, and material was not reviewed prior to publication.