Identity protection company Okta (OKTA) may have snatched defeat from the jaws of victory. The company recently brought out its earnings report that offered a lot of positive points.
However, it may have done too well for its own good. Some may be concerned about sustainability, but two recent dips provide a good starting point to buy in on Okta. That’s why I’m bullish on this valuable identity protection firm. (See Analysts’ Top Stocks on TipRanks)
Looking at Okta’s stock charts for the year so far is the personification of volatility. In the first quarter alone, the company saw two run-ups and two drops. The second quarter offered three run-ups and two drops. Another run-up in October held on for longer than normal. It proved to be only the predecessor to the most pronounced drop the company’s stock had seen this year.
In just two weeks, the company went from approaching $270 a share to just under $200 per share on November 30. The company has since bounced back once again and is sitting near $215. (See Okta stock charts on TipRanks)
The latest round of volatility might be connected to the company’s earnings report. The company posted a loss of $0.07 per share on earnings. That’s not good news in isolation. Given that analysts were calling for a loss of $0.24 per share, it’s a significant beat.
The company also delivered a win on revenue, coming in at $350.7 million against estimates of $327.1 million. The full-year forecast offered a bit of a win as well. Okta looked to bring in revenue of $1.28 billion, which is slightly above Street estimates. The company also expects an adjusted loss per share of $0.52 to $0.53 per share, which is an improvement from earlier losses between $0.74 and $0.77 per share.
Several individual components gave that a lift. Okta saw subscription revenue increase 63% against this time last year, and billings were up about 54%. Both were significant wins; however, the adjusted operating margin showed some serious troubles. It was down 3%, and given that it was 3% a year ago, that’s a fairly sharp decline.
The Biggest Dip Spells Opportunity
There’s quite a bit of objectively bad news surrounding Okta. The company is producing losses and has done so for quite some time. Worse, the company is projecting losses into next year. That’s not especially encouraging, either.
However, a look at Okta’s charts and price target data suggests there’s a substantial potential win here. The company is actually trading under its lowest price target right now. Significant upside potential is on tap here, even if the company is having trouble turning a profit.
Better yet, much of what Okta has to offer is likely to prove vital to a range of fields. E-commerce, investing, and nearly anything with an online connection can readily tap Okta for its range of options.
From single sign-on to multi-factor authentication, Okta’s stock in trade is just the thing to keep the internet comparatively safe. With the growth of e-commerce and other operations, improved security will be crucial going forward.
If Okta can get proper marketing support behind it, it stands to win a significant portion of that business. That should turn it into a profitable operation.
Wall Street’s Take
Turning to Wall Street, Okta has a Moderate Buy consensus rating. That’s based on nine Buys and five Holds assigned in the past three months. The average Okta price target of $270.38 implies 26.2% upside potential.
Analyst price targets range from a low of $230 per share to a high of $320 per share.
Concluding Views
With the biggest dip in the company’s history now behind it, buyers are already streaming into Okta. That’s potentially good news in and of itself. There’s a buying opportunity afoot in a company that’s coming off its 52-week lows.
The company’s massive volatility over the last year suggests that it could recover its highs. It could also retest lows, but given that we just saw those lows, the odds of going even farther down are unlikely. Throw in a product base that’s likely to be vital in running the internet and most remote online operations, and things only get better.
Okta has great potential ahead. It may be worth a look to buy in before the next round of gains hits.
Disclosure: At the time of publication, Steve Anderson did not have a position in any of the securities mentioned in this article.
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