Okta (OKTA 3.31%) shareholders lost ground to the market on Monday, with the stock down by 8.3%, compared to a 0.4% decline in the S&P 500 and a 1.2% dip in the tech-focused Nasdaq index.
The session's decline continued a trend for Okta and many of its peers in the cloud and software services niches. But it also reflected worries about a potential slowdown ahead in the cybersecurity space.
After the cybersecurity industry experienced soaring growth in earlier phases of the pandemic, investors are wondering whether a hangover is due in 2022. Okta's peer Palo Alto Networks will report its latest earnings results in just a few days, and there are concerns about weaker profits ahead for its business in an era of rising interest rates and a slowing economic expansion.
Okta's shares have been even more sensitive to these worries, given that the identity management specialist isn't profitable currently, and completed a large acquisition in 2021 that is liable to soak up more cash in the short term.
Okta will deliver its next operating update in early June, and that report may boost investor sentiment toward the stock. After all, the company reported solid growth in its fiscal 2022 Q4 (which ended Jan. 31), amid continued strong demand for its identity management services.
Yet today's investing climate has many on Wall Street more focused on increasing profitability, so Okta's stock price might remain under pressure until the company can start showing progress on generating sustainable profits. Executives are predicting a non-GAAP operating loss of around $185 million in 2022 compared to a loss of $68 million last year.
Improvements to that outlook would likely help the stock price. Yet management might keep its focus on the long-term growth of the business, choosing to accept losses in the near term in exchange for getting it on a stronger sales footing.