Shares of Okta (OKTA -0.69%), the identity-focused cybersecurity specialist, were falling for the second session in a row Monday, following Friday afternoon's news of a security breach.
Today, the stock fell further as Wall Street analysts shared largely bearish commentary in the wake of the incident.
As of 11:35 a.m. ET, the stock was down 7.1% after falling 11.6% in Friday's session.
Image source: Getty Images.
Okta's new security threat
Shares fell on Friday after the Krebs on Security blog initially reported that hackers had stolen access tokens from Okta's customer support unit in an incident that affected a "very small number" of customers.
In its own blog post, the cloud identity company said it had identified adversarial activity that used a stolen credential to access Okta's support case management system. It also said that all customers who were impacted had been notified.
Today, several analysts responded negatively to the incident. Citigroup added Okta to its "negative catalyst watch," saying that even if the breach is contained, the negative impact on sentiment after multiple security breaches is concerning. It also said reputational risk could affect new customer growth.
Similarly, Evercore ISI put Okta on its tactical underperform list, calling the security incident Okta's second major breach in about two years, and said it could impact customer confidence in Okta.
BTIG, however, said that investors overreacted to the news as the breach didn't impact Okta's products or services. The firm maintained a buy rating and a $98 price target.
Will Okta stock keep falling?
There have now been multiple reported security breaches against Okta, the best known of which was the Lapsus$ attack early last year. That incident did not have a sustained impact on Okta's business so it seems unlikely that this one, which is a smaller breach, will either. However, there is a reputational risk from the publicity of these breaches, and it's harder to discern its impact.
Okta stock has now fallen close to 20% over the last two sessions, essentially giving back the gains it made after surging on its most recent earnings report.
The stock now trades at a price-to-sales ratio of 6, which is cheap compared to its historical valuation, but shares are likely to be in the penalty box until the company can reassure investors.
Long-term investors could use the sell-off as a buying opportunity, but Okta stock is likely to be volatile as cloud software demand is still shaking out and as the company's push to expand its profit margin is ongoing.
