After a remarkable run initially, shares of newly listed company, Okta, Inc. (OKTA - Free Report) have lost momentum of late. The stock touched its lowest level of $22.33 in yesterday’s trade since it went public on Apr 7, 2017.
Notably, at yesterday’s closing price of $22.50, the stock has underperformed the Zacks Internet Software-Services industry since it began trading. While the industry gained 8.5%, the stock lost 4.3% over the same time frame.
What’s Bothering Investors?
The recent pessimism surrounding the stock may be due to increasing competitive threat from Microsoft (MSFT - Free Report) , which is currently the biggest player in the Identity Access as a Service (IDaaS) market. Microsoft is smartly selling its IDaaS solution by bundling it with its Azure Active Directory Premium solution, which has been seeing growing adoption across enterprises.
Additionally, Microsoft is ahead of Okta on the pricing front too. As per sources, the company sells the Azure Active Directory Premium P1 and P2 plans at $6 and $9 per month, respectively. This is significantly lower than Okta’s pricing of $14 a month per user. This could pose a threat to the adoption of Okta’s offering.
Apart from this, investors are also worried about competition from existing players such as Salesforce (CRM - Free Report) and IBM (IBM - Free Report) which are expanding their offerings. Being a very small company compared to the likes of Microsoft, IBM and Salesforce, it will be very tough for Okta to gain market share.
We note that since Okta is a new name in the business, its spending on sales and marketing also remains quite high. This increases its operating expenses and exposes it to losses. Though its loss per share narrowed in first-quarter 2018 due to an increase in the number of outstanding shares post its initial public offering, the non-GAAP net loss widened year on year by 3.62%.
Nevertheless, we believe that Okta can bounce back given its solid customer base, which includes the likes of National Geographic, LinkedIn, Adobe and Workday, and its leadership position in the IDaaS segment. Gartner named it the leader in the segment for three consecutive years.
Currently, Okta has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
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And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
After a remarkable run initially, shares of newly listed company, Okta, Inc. (OKTA - Free Report) have lost momentum of late. The stock touched its lowest level of $22.33 in yesterday’s trade since it went public on Apr 7, 2017.
Notably, at yesterday’s closing price of $22.50, the stock has underperformed the Zacks Internet Software-Services industry since it began trading. While the industry gained 8.5%, the stock lost 4.3% over the same time frame.
What’s Bothering Investors?
The recent pessimism surrounding the stock may be due to increasing competitive threat from Microsoft (MSFT - Free Report) , which is currently the biggest player in the Identity Access as a Service (IDaaS) market. Microsoft is smartly selling its IDaaS solution by bundling it with its Azure Active Directory Premium solution, which has been seeing growing adoption across enterprises.
Additionally, Microsoft is ahead of Okta on the pricing front too. As per sources, the company sells the Azure Active Directory Premium P1 and P2 plans at $6 and $9 per month, respectively. This is significantly lower than Okta’s pricing of $14 a month per user. This could pose a threat to the adoption of Okta’s offering.
Apart from this, investors are also worried about competition from existing players such as Salesforce (CRM - Free Report) and IBM (IBM - Free Report) which are expanding their offerings. Being a very small company compared to the likes of Microsoft, IBM and Salesforce, it will be very tough for Okta to gain market share.
We note that since Okta is a new name in the business, its spending on sales and marketing also remains quite high. This increases its operating expenses and exposes it to losses. Though its loss per share narrowed in first-quarter 2018 due to an increase in the number of outstanding shares post its initial public offering, the non-GAAP net loss widened year on year by 3.62%.
Nevertheless, we believe that Okta can bounce back given its solid customer base, which includes the likes of National Geographic, LinkedIn, Adobe and Workday, and its leadership position in the IDaaS segment. Gartner named it the leader in the segment for three consecutive years.
Currently, Okta has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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