Case Study: What Credible analysts are saying on Okta Inc (OKTA) stock
Key Points
Okta, Inc shares rose by 28.95% this week. However, even after this double digit really, OKTA is down by 70.8% on a year-to-date basis. This compares poorly against the S&P 500, which is down by approximately 15.1% during 2022 thus far.
Due to its leadership position in the digital security space, Okta is believed to have secular tailwinds; however, it needs to execute on its sales growth plans.
Okta posted Q3 earnings this week, beating Wall Street’s expectations on the top and bottom lines. OKTA reported sales of $481.04 million, beating Wall Street estimates by $15.67million, representing 37.2% year-over-year growth. The company’s GAAP EPS was $0.00, which was $0.24 above Wall Street’s consensus.
65% of recent articles published by credible authors focused on Okta shares offer a “Bullish” bias. 7 out of the 11 credible credible Wall Street analysts who cover OKTA believe shares are likely to rise in value. The average price target being applied to Okta, Inc by these credible analysts is $100.10, which implies upside potential of approximately 53.8% relative to OKTA's current share price of $65.08
Angela Harmantas, a Nobias 4-star rated author: “Total revenue was $481 million versus consensus estimates of a little over $465 million, representing an increase of 37% year-over-year.”
Bert Hochfeld, a Nobias 4-star rated author: “Miscues are punished severely, while strong execution merely slows declines. Sadly, Okta has had its share of miscues including a couple of data breach and a flawed sales force integration strategy.”
Performance
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Nobias insights
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Bearish Take:
OKTA Dec 2022
Bullish Nobias credible authors:
Okta, Inc, a leader in the digital security space, reported earnings last week. This stock has been beaten down in a major way throughout 2022 and prior to the results, Bert Hochfeld, a Nobias 4-star rated author, wrote about Okta in an article at Seeking Alpha, calling the stock an appealing “contrarian” opportunity for investors to consider.
Hochfeld began his report by stating, “Stocks have been cratering! IT stocks have been cratering more!” The ETFMG Prime Cyber Security ETF (HACK) is down by 23.47% on the year, underperforming the S&P 500, which is down by 15.1% on the year by a wide margin. “But,” he said, “Okta, the leader in the identity management category, has seen its shares fall far beyond average.”
Okta’s 2022 performance is much worse; OKTA shares are down by 70.77% on a year-to-date basis. Hochfeld noted one of the reasons that OKTA shares are down so far, saying, “The company executed a strategic merger, with AuthO and then basically fumbled the ball in terms of achieving sales synergies that were a key justification for the substantial purchase price.” But, moving forward, he likes the stock, in part, because “I have recommended the shares of the leading cyber-security vendors as “safe havens” in the coming recession.”
With specific regard to Okta, Hochfeld wrote, “Miscues are punished severely, while strong execution merely slows declines. Sadly, Okta has had its share of miscues including a couple of data breach and a flawed sales force integration strategy.” But, after the stocks -70% downfall, he’s became interested in shares again.
Hochfeld said, “My reason to revisit the investment thesis is simply that identity management is an enormous, and under-penetrated market, and Okta remains the leading participant in the space.” He continued, “It is infrequent that a software category leader also has the potential for really significant returns. But I think that Okta is one such company.”
Regarding Okta’s turnaround potential, Hochfeld said, “This is not a short-term project.” He continued, “Okta is not going to achieve a turn-around from its current condition in a quarter or two.” “But fortunately for Okta,” he wrote, “cyber-security and identity management will be less affected by recessionary headwinds than most other segments of the IT space.”
“The most significant issues for this company has essentially been that of sales force execution, and go-to-market messaging,” Hochfeld said. But, he points out, “One of the advantages that Okta has is that it is a platform neutral solution that offers enterprises the opportunity to optimize their identity management paradigm by standardizing on a single vendor.”
Hochfeld believes that this is a pitch that OKTA’s sales team can make to enterprise clients. He wrote, “The message is simple; it is desirable to partner with a vendor who can offer the whole range of identity management solutions on a multiplicity of cloud deployments and for many different use cases.”
Ultimately, he concluded, “The odds are that Okta will right its ship.” And therefore, he said, “As with most contrarian calls, timing is never exact or guaranteed, but my view is that by the time everyone agrees that the company’s problems are solved, its relative valuation will balloon. This is one case in which I would rather be early than late.”
Okta posted Q3 earnings this week, beating Wall Street consensus estimates on both the top and bottom lines. Angela Harmantas, a Nobias 4-star rated author, covered those results in an article published at Proactiveinvestors.com.
Harmantas highlighted Okta’s top-line results writing, “Total revenue was $481 million versus consensus estimates of a little over $465 million, representing an increase of 37% year-over-year.” She continued, “Subscription revenue was $466 million, an increase of 38% year-over-year.”
“Meanwhile,” Harmantas said, “the company’s fourth-quarter adjusted earnings (EBITDA) guidance of nearly $0.11 a share far surpassed analysts' estimates for a loss of $0.11 per share.” During Okta’s Q3 results the company provided investors with forward guidance, highlighting expectations for Q4 as well as for the full-year.
Okta’s earnings report said: “For the fourth quarter of fiscal 2023, the Company expects:
Total revenue of $488 million to $490 million, representing a growth rate of 27% to 28% year-over-year;
Current RPO of $1.63 billion to $1.64 billion, representing a growth rate of 21% year-over-year;
Non-GAAP operating income of $15 million to $17 million; and
Non-GAAP diluted net income per share of $0.09 to $0.10, assuming diluted weighted-average shares outstanding of approximately 175 million.”
The report continued: “For the full year fiscal 2023, the Company now expects:
Total revenue of $1.836 billion to $1.838 billion, representing a growth rate of 41% year-over-year;
Non-GAAP operating loss of $41 million to $39 million; and
Non-GAAP net loss per share of $0.27 to $0.26, assuming weighted-average shares outstanding of approximately 158 million.”
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
During Okta’s Q3 report, Todd McKinnon, Chief Executive Officer and co-founder of Okta, who quoted saying: “We’re pleased with our third quarter results and the early traction of our refined go-to-market strategy as identity continues to be a long-term, strategic investment for our customers. With our Workforce Identity and Customer Identity Clouds, the market’s leading identity cloud platforms, we are delivering the innovation and simplicity our customers need to solve their complex identity challenges. We remain focused on go-to-market execution, spend efficiency measures, and increasing profitability as we navigate an evolving macro environment.”
Overall bias of Nobias Credible Analysts and Bloggers:
Okta’s strong results, attractive guidance, and upbeat commentary by management inspired a strong double digit rally for OKTA shares. OKTA opened up the next trading day 21% higher than they closed pre-earnings. Overall, the stock rose by 28.95% last week. And according to the credible authors and analysts that the Nobias algorithm tracks, this could be the start of a sustained rally for shares.
65% of recent articles on Okta published by the credible authors that the Nobias algorithm tracks have expressed a “Bullish” bias towards shares. 7 out of the 11 credible Wall Street analysts that Nobias tracks believe that shares of Okta are likely to head higher from here. Currently, Okta shares trade for $65.08 and the average price target being applied to shares by these credible individuals is $100.10, which implies upside potential of approximately 53.8%.
Disclosure: Nicholas Ward has no OKTA position.
Disclosure: Nicholas Ward has no DG position. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
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