What happened

Shares of security software maker Okta (OKTA -1.60%) jumped a solid 5% in 11:20 a.m. EDT trading Wednesday after receiving an upgrade from outperform to strong buy (i.e., from "buy" to "buy more") this morning.

StreetInsider.com has the details.

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Image source: Getty Images.

So what

Okta stock is down only about 11% from its highs of early February. Since the beginning of the year, it's actually up 4%, and it's up 25% over the last 12 months. Despite this relatively strong price performance, Raymond James characterizes the stock as a "former angel that [that] has fallen far enough," says StreetInsider, and he argues that identity access management (IAM) -- Okta's forte -- is a "top three" category for corporate tech spending as companies aim to secure computer networks against unauthorized access.

In the analyst's opinion, consensus estimates for Okta's billings this coming quarter -- less than $300 million -- are too conservative; RJ predicts the number will be closer to $350 million.  

Now what

Assuming Raymond James is right about that, the analyst believes that Okta's upcoming Q2 2021 earnings report (due out Wednesday, Sept. 1) will surprise investors enough that they will "re-rate" (i.e., upgrade) the stock.

Moreover, the analyst seems to be thinking that the stock could become a buyout candidate, observing that "deals" (i.e., mergers and acquisitions) in the IAM sector are increasing in both frequency and size. This could set up a situation in which, heads, investors win, and tails, they don't lose, such that Okta shareholders profit whether Okta remains independent or gets bought out at a premium.  

Given this bullish outlook, is it any wonder the shares are rising today?