What happened
Tech stocks are moving in opposing directions Monday afternoon, with shares of online identity verifier Okta (OKTA -0.69%) dropping 5.1% through 1 p.m. ET and cloud-based customer relationship management software provider HubSpot (HUBS -0.78%) falling 6.3%. On the other hand, customer communications software maker Weave Communications (WEAV 3.85%) is heading in the opposite direction, rising 6.5%.
I suspect investment bank Stifel Nicolaus can be blamed -- or thanked, as appropriate -- for each of these moves.
Image source: Getty Images.
So what
Let's begin with the bad news. This morning, Stifel cut its price targets on both Okta and HubSpot. As The Fly reports, Okta got chopped to $195 a share on generally negative sentiment surrounding "enterprise software" at Stifel.
The "vast majority" of the software companies Stifel follows will see slower growth in both their top- and bottom-line numbers as a result of "the ongoing fallout of the Russia/Ukraine war, accelerating supply chain disruptions and the expanding impact of meaningfully higher energy prices on consumer spending," reports The Fly. For this same reason, the analyst cut its valuation of HubSpot by 18% -- to $700 a share.
Oh, and Stifel also cut its valuation of Weave Communications stock by about 14%, to $12 a share.
Now what
Of course, if all of the above is true, and Stifel is seeing headwinds slowing down business at all three of these companies, you may be wondering why Okta and HubSpot stocks are both going down today ... but Weave Communications stock is going up?
And that's an excellent question, but I'm afraid only about one-third of the answers may make sense.
Specifically, if you look at Weave Communications stock right now, you may notice that the stock is priced at just $6 and change. A $12 price target, therefore -- although certainly less optimistic than the $14 price target Stifel formerly had hung on the stock -- still leaves the potential for Weave stock to nearly double over the next 12 months. That prospect, and the fact that Stifel still rates Weave stock a buy, explains why investors are doing just that: buying Weave stock today.
In contrast, despite the fact that Stifel's lowered price target on Okta leaves about 18% apparent upside in the stock, the analyst only rates Okta a hold -- and that assessment may be scaring investors away today.
Now, are you ready for the last and least logical investor reaction today? In cutting its price target on HubSpot to $700, Stifel still sees potential for that stock to gain as much as 52% this year -- and for this reason Stifel still recommends buying HubSpot. Investors don't seem convinced, however, that buying into an unprofitable cloud computing stock at 15 times sales is a great idea -- and I fear Stifel's reduced price target is giving them an excuse today to sell.
