Just when many investors thought that a seasonal September slump had come a month early, stock markets have regained their upward trend. Investors hope that the economy will chart a Goldilocks-style path, remaining strong enough to avoid an outright recession but not being so strong that the Federal Reserve has to keep interest rates high for a long time. That enthusiasm persisted on Thursday morning, as stock market index futures indicated a strong likelihood of further gains when the market opens.
Tech stocks have been particularly volatile this year, rising sharply during good times but also seeing steeper declines when market sentiment falters. On Thursday, though, investors were excited about the financial results that Salesforce (CRM 3.44%) and Okta (OKTA +0.27%) released, and that helped to create the upward momentum for the entire market. Here's what people are talking about in the two companies' respective reports.
Salesforce satisfies its skeptics
Shares of Salesforce were up about 7% in premarket trading Thursday morning. The customer relationship management software pioneer reported fiscal second-quarter financial results for the period ended July 31 that showed good growth trends and suggested plenty of potential for further gains ahead.
Salesforce saw its revenue rise 11% year over year to $8.6 billion during the quarter. Current performance obligations got a 12% boost to $24.1 billion, indicating the health of Salesforce's backlog of work. Adjusted net income soared 76% from year-ago levels to $2.09 billion, producing adjusted earnings of $2.12 per share.
NYSE: CRM
Key Data Points
CEO Marc Benioff heralded Salesforce's transformation, arguing that its suite of software products is "leading customers into the new AI era." By concentrating on its best growth opportunities and cutting costs elsewhere, Salesforce has been able to do better than it previously expected, and it boosted its guidance for the remainder of the fiscal year. The company now sees itself growing sales by about 11% in fiscal 2024 to between $34.7 billion and $34.8 billion, with adjusted earnings of $8.04 to $8.06 per share.
Salesforce's sales growth rate can't match up to the higher pace of its smaller peers in the tech industry, even with AI-related tailwinds helping its business. Nevertheless, investors were pleased to see so much progress in boosting efficiency and improving profitability, and the higher guidance could power more share-price gains during the rest of 2023 and beyond.
Okta looks more secure
Okta's stock enjoyed an even bigger upward move, jumping nearly 11% before the open. The identity-based cybersecurity specialist boosted its guidance for the remainder of the year and confirmed its ability to take advantage of the constantly rising need among its clients to keep their proprietary information secure.
Okta posted revenue of $556 million in its fiscal second quarter that ended July 31. That was up 23% from year-ago levels, with subscription-related sales climbing 24% year over year to $542 million. Okta reversed a year-ago loss with adjusted net income of $56 million, which worked out to $0.34 per share. Given the company's previous guidance for $0.21 to $0.22 per share in earnings, investors were pleased with the results.
NASDAQ: OKTA
Key Data Points
Based on strong demand from its customers, Okta also boosted its projected sales growth rate for the year to 19%, up by 1 to 2 percentage points from three months ago. Moreover, its efforts to emphasize profitability have paid off even more clearly, as its new earnings projections of $1.17 to $1.20 per share for the year were up about 30% from its guidance last quarter.
Investors can expect share prices in the sector to remain volatile, but fundamentally, Okta is doing everything it can to take advantage of the growth opportunities in the market right now. That could help sustain a longer-term rise in the stock into 2024.
