Portfolio 2023: Buy Okta

Admin -

We are adding the best cybersecurity stock today in Portfolio 2023, based on stage analysis and estimated earnings growth in next two years.

Okta is leader in identity management, who created this market.

Okta Inc: Buy between $65 and $75

Okta, Inc. engages in the provision of an identity management platform for enterprises. It operates through the United States and International geographical segments. The firm's products include single sign-on, multi-factor authentication, API access management, authentication, user management, and lifecycle management.

Current Price : $73

Pays Dividend : No

Market Cap : $11.7B

Max Analyst Target : $110

Net Income growth: Negative

Basic EPS growth: Negative, Expected to turn positive in 2023 and 5x by 2025

Stop Loss at: $63

Weekly Chart:

Okta Weekly Chart

Technical Analysis:

As most of the tech companies, Okta was in Stage 4 decline entire last year and has been sold off significantly along with broader market.

Cybersecurity is something not going away and still in its nascent stage.

Today Okta has corrected from its high of $280 to $73, while bottoming in Nov around $44. Since then it has recovered almost 60%.

Okta is currently forming Stage 1 and now trading above 30 Week moving average and right above major volume shelf, and we are considering it as a major support.

We expect Okta will start trending up and start it's Stage 2 journey, our first target will be $110. At first target, expect to book 20% of profits.

Earnings Estimates:

In 2020 Okta become cash flow positive and started showing positive earnings, but due to economic slowdown and over investing in 2021, it turned negative and continued negative in 2022.

According to earning forecast, Okta is expected to show positive earnings in 2023 and expected to 5x by end of 2025.

On December 1, 2022, Okta announced its earnings for the third quarter of fiscal year 2023, which ended on October 31, 2022. Here is an analysis of the company's financial results:

  • Third Quarter Fiscal 2023 Financial Highlights:
  • Revenue: Total revenue was $481 million, an increase of 37% year-over-year. Subscription revenue was $466 million, an increase of 38% year-over-year.
  • RPO: RPO, or subscription backlog, was $2.85 billion, an increase of 21% year-over-year. cRPO, which is contracted subscription revenue expected to be recognized over the next 12 months, was $1.58 billion, up 34% compared to the third quarter of fiscal 2022.
  • Calculated Billings: Total calculated billings was $532 million, an increase of 37% year-over-year.
  • GAAP Operating Loss: GAAP operating loss was $207 million, or (43)% of total revenue, compared to a GAAP operating loss of $199 million, or (57)% of total revenue, in the third quarter of fiscal 2022.
  • Non-GAAP Operating Income/Loss: Non-GAAP operating income was $0.3 million, or 0.1% of total revenue, compared to non-GAAP operating loss of $10 million, or (3)% of total revenue, in the third quarter of fiscal 2022.
  • GAAP Net Loss: GAAP net loss was $209 million, compared to a GAAP net loss of $221 million in the third quarter of fiscal 2022. GAAP net loss per share was $1.32, compared to a GAAP net loss per share of $1.44 in the third quarter of fiscal 2022.
  • Non-GAAP Net Loss: Non-GAAP net loss was $1 million, compared to non-GAAP net loss of $11 million in the third quarter of fiscal 2022. Non-GAAP basic and diluted net loss per share was $0.00, compared to non-GAAP basic and diluted net loss per share of $0.07 in the third quarter of fiscal 2022.
  • Cash Flow: Net cash provided by operations was $10 million, or 2% of total revenue, compared to net cash provided by operations of $37 million, or 11% of total revenue, in the third quarter of fiscal 2022. Free cash flow was $6 million, or 1% of total revenue, compared to $33 million, or 10% of total revenue, in the third quarter of fiscal 2022.
  • Cash, cash equivalents, and short-term investments were $2.47 billion at October 31, 2022.

Financial Outlook:

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.

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.

Overall, Okta's Q3 2023 earnings show solid revenue growth and customer acquisition. However, the higher net loss compared to the same period last year may indicate increased spending on research and development or other initiatives. The company's guidance for the fourth quarter indicates that it expects to continue its growth trajectory, with a strong revenue forecast.

-Alpha Staff