Okta
shares were tumbling on Thursday as investors digested its first-quarter earnings.
Wall Street analysts still like the identity-management software provider’s products but counsel against buying the dip as macroeconomic concerns mount.
Okta
(ticker: OKTA) shares were down 19% at $73.20 in premarket trading on Thursday. First-quarter earnings beat expectations but concerns over slowing client spending look to have investors worried about the company’s valuation.
“With growth expected to deteriorate near term, and cash flow not yet at levels to support valuation, we see more favorable risk-reward elsewhere within our coverage and are stepping to the sidelines,” analysts at
J.P. Morgan
wrote in a research note.
J.P. Morgan downgraded its rating on Okta stock to Neutral from Overweight and its target price to $85 from $95. The bank’s analysts said Okta seems to be more sensitive to macroeconomic uncertainty than its peers.
Okta was one of the worst-performing stocks of 2022, when it dropped 70%. Going into the earnings report shares had recovered strongly so far this year, rising 33%, but investors look to be turning more skeptical on technology-company valuations.
“We’re intrigued by a CY24 [calendar year 2024] setup that could include easy comps [comparables] given current trends and the potential for reacceleration with the planned product launch during this time, but suspect the stock may tread water as investors hesitate to jump in front of the ‘falling knife’ that describes current growth trends,” analysts at Raymond James, led by Adam Tindle, wrote.
Raymond James has a Market Perform rating on the stock.
Write to Adam Clark at [email protected]
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