Why Cloud Computing Stocks Soared on Wednesday
What happened
It doesn't always take much news to drive a stock 10% higher. Today, for example, lots of classic high-growth tickers in the cloud computing market surged skyward on nothing more substantial than a general market bounce. If a rising tide lifts all boats, this one simply buoyed some vessels better than others. Cloud-data management pro Talend (NASDAQ: TLND) rose as much as 11.8% higher, cloud-based authentication specialist Okta (NASDAQ: OKTA) reached an 11.3% peak, and cloud security expert Zscaler (NASDAQ: ZS) topped out at a 10.3% gain.
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So what
With moves like these, one might expect at least some major news tidbit in the cloud computing sector at large. That was not the case here. Instead, these volatile tickers simply tagged along with one of the sharpest moves to the upside in stock market history. The Dow Jones Industrials index gained 1,086 points or 5% on Wednesday, while the tech-heavy Nasdaq index rose 5.8% higher.
Besides providing their services in the same cloud-computing niche, this batch of companies has a couple of other important details in common. They are all unprofitable today, and they all entered the stock market in the past 22 months. These facts make it more difficult to judge their business performance and to set a fair market price on their stocks, making all three tickers more volatile and fundamentally more sensitive to market-moving phenomena. So on a day where market makers seemed determined to erase as much of this year's share price drops as possible, our protagonists simply threw some extra fuel on the fire.
Now what
Both Okta and Zscaler have a tendency to beat Wall Street's expectations in their earnings reports, and both stocks have crushed the market in 2018. Okta has now gained 145% this year, and Zscaler's shares are up by 126% since launching its IPO in March.
Talend's business performance has been more hit-and-miss, triggering as many sudden drops as massive surges in its stock price. All told, Talend investors have posted an 8% loss in 2018. That's still slightly ahead of the S&P 500's 10% loss, but far from an inspiring victory march. Among other issues, the company has been accused of offering less than perfect transparency in its results and operations. A newly appointed CFO might cure that issue.
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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Okta and Talend. The Motley Fool has a disclosure policy.
