Shares of Okta Inc. continue to plummet in the wake of a recently disclosed data breach. Analysts are now assessing the potential repercussions of this breach on the company's future.
The stock experienced a significant drop of over 7% in Monday morning trading, following an 11.6% sell-off on Friday when Okta disclosed the security breach. Hackers were able to gain access to stolen credentials and view files related to some support cases.
Evercore ISI analyst Peter Levine has issued a tactical underperform call on Okta shares on Monday due to this latest development. Levine's concern lies in the likelihood that these events will impact Okta's pipelines in the near term, potentially leading to a downward revision of FY24 estimates and jeopardizing consensus estimates.
Adding to the uncertainty, Okta customers MGM Resorts International and Caesars Entertainment Inc. have already experienced breaches earlier this year. Through conversations with partners, Levine has learned that customers are attempting to leverage these incidents by seeking discounts and prolonging the sales cycle—seeking a better understanding of Okta's involvement.
It remains to be seen how Okta Inc. will navigate these challenges and restore confidence among investors and customers alike.
Okta Faces Concerns Over Recent Breach
The recent breach of Okta's security systems has raised concerns among customers and industry analysts. While the breach was a result of social engineering or involvement of a third party, the incident has prompted customers to seek clarifications and has led to a delayed response from Okta.
Andrew Nowinski from Wells Fargo expressed his concerns, emphasizing that this breach is particularly troubling compared to the company's previous security incident. According to Nowinski, Okta was at fault in this instance, as they were unaware of the breach and lacked internal capabilities to detect such behavior. It took nearly two weeks for Okta to make a public disclosure, which raises questions about their preparedness to handle such incidents.
Despite these concerns, Nowinski maintained an overweight rating on Okta shares. However, he cautioned that this breach may have a negative impact on the company's performance in the current quarter and its overall pipeline.
This latest breach highlights the need for robust security measures and a proactive approach to detect and respond to potential threats. Okta will need to address these concerns and reassure customers of their commitment to maintaining a secure environment.