Every group, generally speaking, has a few bad apples. It could be a branch of government, an online subreddit, a sports team, a nonprofit organization, or a stock market sector.
Now, the existence of a few bad apples doesn’t automatically mean you end up with a spoiled bunch. The typical solution is to weed out the bad apples. Corny as it sounds, this principle holds true.
Here, we dive into a story within the tech scene, where not all stocks are flying as high as the sector. A handful of companies are facing revenue drops – a red flag amidst the positive noise.
In the following article, I’ll attempt to untangle these threads, looking at a few stocks that aren’t riding the wave. As the tech arena booms, it’s essential to heed these nuanced stories – a reminder that not everything shining is gold.
BlackBerry Ltd (BB)
While not the first name that comes to mind when we think of cybersecurity, BlackBerry Ltd. (BB) leads off our list of companies to avoid, or at least take a hard look at. BB’s cybersecurity arm faces a substantial challenge as its year-over-year revenue decline persists. The more profound concern lies in the diminishing recurring revenue trend. BB aims to provide cybersecurity for autonomous vehicles, underscoring intense market competition.
Although the company has secured recent design victories, its shift in focus remains unproven. You can say there’s a reasonable approach to considering BB as an investment, as it’s been trading under $5. However, the stock has dropped by 29% in the past twelve months, despite a 46% surge in 2023. Let’s keep an eye on BB before putting our money into it.
SentinelOne Inc (S)
While cybersecurity is often seen as resistant to economic downturns, SentinelOne (S) promotes its Artificial Intelligence-driven Singularity Platform as a trailblazer in autonomous technology. Despite the promising combination, though, caution is warranted with S. After Q1 earnings, the company revised its sales projections for fiscal year 2024, leading to a 5% workforce reduction.
This move failed to reassure investors, as S stock plummeted by 26% post-announcement. However, the concern runs deeper—this decline is part of an ongoing pattern that we’ve seen since the firm’s 2021 IPO, resulting in a staggering 64.8% drop since then. While the cybersecurity market thrives, wiser alternatives exist for all but the most risk-tolerant investors.
Okta Inc (OKTA)
Okta Inc. (OKTA) prides itself on being the sole independent and neutral identity solution, granting secure access to external networks in our remote-driven world. This ongoing relevance suggests a consistent revenue flow for OKTA. This aspect correlates with the company’s consecutive revenue growth. However, that pace has diminished. A similar trend echoes in earnings, and it’s not uncommon for companies in this domain to sometimes lack profitability.
Further positive indicators emerge for OKTA, such as rising margins and updated yearly guidance. However, these factors have yet to substantially boost the stock’s value, something you would expect. Amid the cybersecurity sector’s expansion, caution is warranted regarding OKTA, which has shown gains so far in 2023 while dipping more than 30% in the past twelve months.
Again, remember that I’m not disparaging OKTA or the other two stocks, and I’m not telling you to “avoid them like the plague” or anything akin to that. I’m simply trying to make the case that although the tech rally on Wall Street has been massive and justifiably so, the tech sector (as with all sectors) is not immune to the fact that some simply aren’t as good as the major players. Perhaps it isn’t wise to look at how well AI and technology are doing and start buying stocks willy-nilly. Keep a watchful eye.