Please ensure Javascript is enabled for purposes of website accessibility

Why Okta Stock Fell 16% in March

By Demitri Kalogeropoulos - Apr 6, 2021 at 8:49AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors weren't thrilled with management's initial 2021 outlook.

What happened

Okta (OKTA 11.41%) 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 person wearing a hood over their face sits in a dark room in front of a laptop

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 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Okta Stock Quote
Okta
OKTA
$97.70 (11.41%) $10.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
345%
 
S&P 500 Returns
119%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/16/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.