Okta, Inc. (OKTA) Is a Trending Stock: Facts to Know Before Betting on It

Okta (OKTA) is trending on Zacks.com, with shares down -11.5% over the past month, while the Zacks Security industry gained 6.6%. Despite recent underperformance, Okta's earnings estimates have been revised upwards, with the current quarter expected to see EPS of $0.84, a +16.7% year-over-year change, and the current fiscal year EPS estimated at $3.28, also a +16.7% increase; the company holds a Zacks Rank #2 (Buy), suggesting near-term outperformance, though its Value Style Score indicates it's trading at a premium to peers.

Analysis

Okta, Inc. (OKTA) has recently attracted significant investor attention despite its shares declining 11.5% over the past month, a stark contrast to the S&P 500 composite's 5.2% gain and the Zacks Security industry's 6.6% rise. Notwithstanding this share price underperformance, fundamental indicators present a more optimistic outlook. Sell-side analysts have notably revised Okta's earnings estimates upwards; the Zacks Consensus Estimate for current quarter EPS is $0.84, reflecting a 16.7% year-over-year increase and a 22.2% positive revision in the last 30 days. Similarly, the current fiscal year EPS estimate of $3.28 indicates a 16.7% YoY growth, with an 11.5% upward revision over the past month. Projections for the next fiscal year also show an 8.7% EPS growth to $3.56, with a 1.1% positive revision recently. This trend in earnings estimate revisions has contributed to Okta's Zacks Rank #2 (Buy), suggesting potential near-term market outperformance. Okta's revenue growth projections are also solid, with a 10% YoY increase to $710.75 million expected for the current quarter, and 9.4% growth forecasted for both the current and next fiscal years, reaching $2.86 billion and $3.13 billion respectively. The company has a strong track record, having beaten consensus EPS and revenue estimates in each of the trailing four quarters; in the last reported quarter, revenues grew 11.5% YoY to $688 million (a 1.22% surprise) and EPS was $0.86 (an 11.69% surprise). However, Okta's valuation appears stretched, as indicated by its Zacks Value Style Score of D, signifying it trades at a premium compared to its peers.

Key Decisions for Investors

• Investors should consider the significant upward revisions in earnings estimates and the Zacks Rank #2 (Buy) as potential catalysts for near-term stock appreciation, despite the recent share price decline.
• Evaluate whether Okta's consistent earnings beats, projected earnings growth of 16.7% for the current year, and revenue growth around 9-10% justify its premium valuation, indicated by a Value Style Score of D.
• Monitor upcoming earnings reports and analyst sentiment closely to ascertain if the positive fundamental momentum can sustain and potentially reverse the recent stock underperformance relative to the market and its sector.