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Why Okta Inc. Stock Was Soaring Today

By Jeremy Bowman – Sep 7, 2018 at 1:52PM

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Shares of the cloud-based security service jumped after it crushed estimates in its quarterly report once again.

What happened

Shares of Okta Inc. (OKTA -2.59%) were flying higher today after the cloud-based identity and security specialist posted another blowout earnings report. Okta beat estimates across the board and raised its guidance for the full year. 

As of 12:09 p.m. EDT on Friday, the stock was up 20.1%.

A conceptual image of a network of clouds with locks on them.

Image source: Getty Images.

So what

Okta blew past its guidance for the second quarter as revenue jumped 57% to $94.6 million, well ahead of analyst estimates at $84.8 million. Customer acquisitions and relationship expansions continued to drive growth as the company added customers in the quarter including the City of Phoenix, the sandwich chain Pret a Manger, and First National Bank of Omaha.

It now counts 5,150 organizations as customers, 837 of which generate $100,000 or more in recurring revenue. That represents a 55% increase in customers at that level from the year before, a sign that the company is successfully growing customer relationships.

On the bottom line, its adjusted loss expanded from $14.1 million to $16.4 million. But on a per-share basis, it remained at -$0.15 as the company's share count expanded following its IPO last April. Still, that beat expectations at -$0.19 a share. Margins also improved despite the wider loss.

Commenting on the quarter, CEO Todd McKinnon said, "We continued to see momentum across our business," and that its performance "is a testament to the increasing strategic need for an identity solution as organizations move to the cloud. This need is pervasive and imperative, and I believe we are in the early stages of capitalizing on this high growth opportunity."

Now what  

Okta also lifted its guidance for the full year, now calling for revenue growth of 45% to 46%, at $372 million to $375 million, up from a previous forecast of $353 million to $357 million. On the bottom line, it sees an adjusted loss of -$0.46 to -$0.48 per share, compared to a prior loss ranging from -$0.54 to -$0.58. COO Frederic Kerrest also said the company is targeting breakeven free cash flow by the end of the fiscal year, showing that operating leverage is improving and that the company is moving toward profitability.

Okta continues to tout the long-term opportunity in cloud-based identity and access. And based on its numbers so far, it's hard to argue with its potential. 

Like many cloud stocks, Okta trades at a sky-high valuation, but if it can keep up its current growth rate, today's price seems more than justified.

Jeremy Bowman owns shares of Okta. The Motley Fool owns shares of and recommends Okta. The Motley Fool has a disclosure policy.

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