The slump put shares in negative territory so far in 2021 while broader indexes set all-time highs.
Many growth stocks that had outperformed the market since the start of the pandemic fell last month, and Okta was caught up in that sell-off. Yet investors also had some concrete reasons to reevaluate their holding after the digital identity management specialist announced fourth-quarter results on March 3. That report showed no signs of a slowdown in its core business, but some on Wall Street were looking for a bolder 2021 outlook from the management team.
CEO Todd McKinnon and his team are calling for sales to rise about 30% this year after jumping 43% in 2020. Investors must balance that good news against the prospects for continued net losses as the software-as-a-service (SaaS) specialist works to scale up its business over the next few years. The pandemic created a more favorable selling environment, and Okta’s strategy involves sacrificing short-term earnings and cash flow in hopes of capitalizing more fully on those tailwinds.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. 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.