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Why Okta Stock Fell 16% in March

By Demitri Kalogeropoulos - Apr 5, 2021 at 9:20AM

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Shares pulled back after a big surge in previous months.

What happened

Okta (OKTA -8.53%) shareholders lost ground to a rallying market last month. Their stock fell 16% compared to a 4.2% rise in the S&P 500, according to data provided by S&P Global Market Intelligence.

The slump put shares in negative territory so far in 2021 while broader indexes set all-time highs.

A man working at a computer.

Image source: Getty Images.

So what

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.

Now what

CEO Todd McKinnon and his team are calling for sales to rise about 30% this year after a 43% jump 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 coronavirus 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.

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