Cloud stocks take a beating

NelsonG · November 19, 2018

It was a stormy Monday for cloud stocks today with the general trend pointing way down. Okta stock took the biggest beating, down over 15 percent to $48.67, and even mighty Salesforce had its worst day since 2016, according to CNBC, down 8.7 percent to $121.01.

Wall Street was apparently disenchanted with just about every cloud company, large and small and in-between. Nobody, it seemed, was spared investor’s wrath:

Box was down 6.93 percent to $16.66
Workday was down 7.57 percent to $124.07
Twilio was down 13.76 percent to $76.90
Amazon (which of course includes AWS) was down 5.09 percent to $1,512.29

That’s just a smattering of the cloud stocks, and it didn’t take any cherry picking to give you the idea. It was a bad day, but there really is no rhyme or reason for this drubbing. The cloud is in high growth mode. Amazon just reported cloud revenue accounted for $6.68 billion, up 46 percent in its most recent earnings report. That’s a run rate of almost $25 billion just for the cloud business.

Salesforce? In August, it reported $3.28 billion for the quarter. That’s 27 percent year-over-year, and puts them on a run rate of over $13 billion. It wasn’t that long ago the company stormed through a $10 billion revenue goal and set its sights on $20 billion.

As for Okta, it’s reporting in a couple of weeks, but in its most recent report, it announced $94.6 million, which accounted for 57 percent year-over-year growth with subscription revenue growing 59 percent year-over-year. None of these sound like companies in trouble, do they?

John Dinsdale, chief analyst and research director at Synergy Research, a firm that tracks cloud market share, said it was a case of today’s short-term snapshot of the market simply not matching the forecasted growth of the cloud in the coming years.

“Well, there is logic and then there is the stock market; and often the two have little in common,” Dinsdale told TechCrunch. “In terms of ongoing market growth and future prospects, absolutely nothing has changed. The market forecasts remain extremely healthy. Indeed, if anything our next forecast update will likely result in us nudging up our forecast growth rates a little,” he said.

In general, the cloud market continues to grow, according to Synergy’s latest reports (which is in line with other market projections). “The Q3 growth rate of 45% compares with a full-year 2017 growth rate of 44% and a 2016 growth rate of 50%. Public IaaS and PaaS services account for the bulk of the market and those grew by 51% in Q3,” Synergy wrote in their October 25th report.

Perhaps this is just a case of one bad day as the stock market continues its overall volatility of the last couple of months, but whatever the reasons, cloud stocks really took it on the chin today.