Okta Stock Shakes Off Analyst Concerns With Stunning Earnings

Okta Inc. NASDAQ:OKTA is a cybersecurity company specializing in identity and access management (IAM) solutions. The information and technology company helps businesses protect against identity-based attacks by providing services to protect employee and customer identities. Some of its tools include multi-factor permissions, single sign-on (SSO) access to multiple applications, access management, and user lifecycle management from onboarding to offboarding. Its list of IT and technology clients includes Alphabet Inc. NASDAQ:GOOGL, Amazon.com Inc. NASDAQ: AMZN, Microsoft Co. NASDAQ:MSFT AND Oracle Co. NYSE: ORCL.

Okta’s reputation takes a hit from customer security breaches

In September 2023, hackers managed to breach many of their large casino clients, including Caesars Entertainment Inc. NASDAQ: CZR, MGM Resorts International New York Stock Exchange: MGM and three other companies using social engineering techniques. MGM is seeking nearly $100 million in damages from the data breach after refusing to pay a ransom to hacking group Scattered Spider. Caesars paid for the ransomware to keep its systems operational. These groups use social engineering techniques to target employees using information gained through their social media to convince them to provide access involuntarily.

Okta has assured the public that their systems were not compromised or breached in these incidents. His shares have ranged from $90.47 to $75.47 in subsequent weeks. Investors feared that an impact on his reputation would impact his operations.

The security breach hits home

Shares managed to climb back to $88.04 when Okta suffered a security data breach in its systems on October 20, 2023. This caused the shares to fall 20% in the following days, reaching a low of $65.04 on October 30, 2023. Clearly, it looks bad when a cybersecurity company gets hacked. Hackers exploited the stolen login credentials of an Okta administrator’s Google account to gain access to Okta’s customer support system. Okta says there is no evidence that hackers exploited the information. Investors feared that these security breaches could have a financial impact on Okta’s performance. Their fears were allayed when Okta released incredible numbers.

Solid revenue and earnings growth

On February 28, 2024, Okta reported fiscal fourth-quarter 2024 earnings per share of 63 cents, beating consensus analysts’ expectations of 12 cents. Okta achieved record non-GAAP profitability. GAAP operating loss was $83 million, or 14% of total revenue, compared to $157 million and 31% of total revenue in the prior-year period.

Revenue grew 18.6% year-over-year to $605 million versus consensus estimates of $587.2 million. Remaining subscription or performance obligation (RPO) backlog was $3.385 billion, up 13% year-over-year. Current remaining performance obligations (cRPOs) increased 16% year-over-year to $1.952 billion. Okta reported record operating cash flow (OCF) of $174 million and free cash flow (FCF) of $166 million.

Okta raises the guide

Okta raised fiscal first-quarter 2025 EPS to 54-55 cents versus 41 cents in analyst estimates. It raised first-quarter revenue from $603 million to $605 million versus consensus estimates of $583.77 million.

For full-year fiscal 2025, non-GAAP diluted EPS is expected to be between $2.24 and $2.29 versus $1.96, according to consensus analyst estimates. Full-year 2025 revenues are expected to grow 10% to 11% year-over-year, reaching $2.495 billion to $2.505 billion versus consensus estimates of $2.48 billion.

Okta CEO Todd McKinnon commented, “We are also pleased with strong revenue performance, driven by strength with large customers. Organizations continue to turn to Okta to help them modernize and simplify their identity infrastructure. As we launch the new tax system this year, we are excited to deliver powerful new features and products, with security as a foundation, to serve our customers and support even more identity use cases.”

Analyst actions

Bank of America upgrades OKTA shares to a Buy rating from Underperform with a $135 price target. Analyst Madeline Brooks believes headwinds from slowing new customer growth, execution issues and customer base saturation existing have softened, as evidenced by RPO and cRPO metrics in the fourth fiscal quarter of 2024. Guidance appears conservative, with a stronger pipeline ahead of fiscal 2025 in the lead.

OKTA analyst ratings and price targets are among the colleagues of MarketBeat.Okta and the actions of competitors can be found with the MarketBeat Stock Screener.

Breakout of the ascending triangle

The daily candlestick chart on OKTA illustrates a breakout of the ascending triangle. The ascending lower trendline formed at $65.18 on October 30, 2024. It formed as pullbacks formed higher lows, then rose through the 200-period daily moving average (MA) resistance, which now it became support at $78.10. The flat upper trendline formed at $90.95 as it represented resistance ahead of the fiscal Q4 2024 earnings release. OKTA remained bullish on its result at the $102.77 level. The daily relative strength index (RSI) rose through the overbought 70 band to peak at the 77 band. Pullback support levels are at $97.52, $90.95, $80.61 and 75 $.47.

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