OKTA Stock: Firing on All Cylinders Suggests Upside Breakout

okta stock price
iStock.com/SARINYAPINNGAM

OKTA Stock: A High-Potential Cybersecurity Play

We all understand the importance of safeguarding communications and data flow between devices and networks.

In the cybersecurity solutions segment, a mid-cap technology growth stock that is worth a look is Okta Inc (NASDAQ:OKTA).

Less than a year ago, in April 2017, Okta filed an extremely successful initial public offering (IPO) launch that was oversubscribed at $17.00. OKTA stock has been sizzling on the chart with an advance of 42% this year.

Okta operates in the identity management solutions area via its “Identity Cloud” platform, which is used to secure connections between devices and a company’s network and applications. The company’s client base includes major technology and communications companies.

Advertisement

OKTA Stock Chart

Chart courtesy of StockCharts.com

While OKTA stock traded at a record $39.13 on February 28, the stock is displaying strong fundamental growth that could propel the stock to much higher levels.

Why OKTA Stock Could Retest Highs

Okta will report its fiscal 2018 results on March 7 and, based on the first three quarters, the company should easily beat the consensus estimated loss of $0.83 per diluted share. In the first to third quarters, Okta beat expectations by a combined $0.27 per diluted share, so it’s not a question of if the company will beat estimates, but rather how much it will beat them by.

On the revenue side, Okta provided a preliminary estimate of $259.2 million to $259.7 million for fiscal 2018, which is just above the consensus estimate of $256.61 million.

One encouraging sign is that the revenue estimate is well above the previous estimate of $235.59 million.

The company reported that it serves over 4,350 clients, with 40% of the clients generating an annual contract value of over $100,000.

For fiscal 2019, revenues are expected to jump 34% to $343.89 million and to as high as $365.0 million, which is above the previous estimate of $320.89 million. (Source: “Okta, Inc. (OKTA),” Yahoo! Finance, last accessed March 2, 2018)

Despite the revenue growth, Okta is still a few years away from turning a profit. On the positive side, the estimated losses have been on the decline.

Analyst Take

Okta appears to be poised for a breakout fiscal 2018 report, which could drive OKTA stock to retest its high and break higher.

But, should Okta fail to deliver a strong fiscal 2018 and fiscal fourth quarter, OKTA stock could decline to the $30.00 to $32.00 level, and even to $28.00 if the initial chart support doesn’t hold. At these levels, OKTA stock could be seen as an aggressive contrarian opportunity.