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Why Okta, Inc. Stock Jumped 31% Last Month

By Jeremy Bowman – Updated Mar 5, 2018 at 3:46PM

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Shares of the identity security specialist surged in February as the company reported a solid preliminary earnings report and got a buy rating.

What happened

Shares of Okta, Inc. (OKTA -3.48%) were moving higher again last month as the online-security specialist jumped on bullish analyst coverage and a strong preliminary earnings report. Momentum appears to be building for the recent initial public offering as investors and analysts alike are recognizing the potential in the enterprise software company.

As the chart below shows, Okta shares rose steadily higher through most of the month, getting a jolt from a buy rating in mid-February. 

OKTA Chart

OKTA data by YCharts.

So what

Needham initiated coverage of Okta on Feb. 14 with a buy rating at a price target of $38, and called its product a "foundational security technology." Analyst Alex Henderson said, "We expect Okta to continue to extend their lead over competitors as the scale of their partnerships and the expansion of their customer base outpace alternatives and amplify Okta's competitive advantage." Needham also noted the company's fast revenue growth and large addressable market. Shares jumped 7.4% on the news.

A person typing on a laptop with screen displaying a padlock icon and a password field

Image source: Getty Images.

Okta followed up that recommendation with some good news of its own, offering a strong preliminary earnings report after trading hours on Feb. 21. The security provider said fourth-quarter revenue should rise between 58% and 59%, to $77 million to $77.5 million, with its total customer base up 40% year over year to 4,350, which would be well ahead of estimates for revenue of $71 million and a customer count of 4,150. The stock rose 6.7% in the next three session following the news.

Now what

Investors will get a closer look at the Okta's fourth quarter when the company delivers its complete fourth-quarter earnings report on Wednesday, March 7. The stock has already jumped 51% this year, so expectations are building for the password- and identity-protection company. Okta is still losing money: It projected an adjusted operating loss of $12.3 million to $11.3 million in the quarter, but the market seems to willing to forgive the losses if the company keeps putting up strong revenue growth. 

Analysts are expecting a loss per share of $0.15 when the company reports on Wednesday.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Okta. The Motley Fool has a disclosure policy.

Stocks Mentioned

Okta Stock Quote
$65.08 (-3.48%) $-2.35

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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