Shares of Okta (OKTA -0.73%) charged out of the gate Tuesday, gaining as much as 8.9%. As of 2:13 p.m. ET, the stock was still up 8.2%.
The catalyst that sent the cybersecurity specialist higher was word that its stock would be added to a premier index early next month.
Joining the big leagues
In a press release that dropped after the market close yesterday, S&P Global announced that Okta would be added to the S&P MidCap 400 index prior to the start of trading on Thursday, May 1. The stock will be replacing Berry Global Group.
Late last year, S&P 500 member company Amcor announced its intention to acquire Berry in a deal valued at $13 billion. The combination got the blessing of regulators and approval from shareholders in March, and the deal is expected to close by mid-2025. The merger will effectively remove Berry from the index, so S&P Global was being proactive.
While it won't have any impact on Okta's financial or operating results, it's generally a positive development when a stock is added to an index. The move increases demand for the shares from index funds, as well as from institutional and passive investors, as they purchase the stock to match the composition of the index in question. This, in turn, puts upward pressure on the stock price -- at least in the short term.
Under the microscope
Okta has been in the midst of a turnaround, and the company's fiscal 2025 fourth-quarter results were promising. Revenue of $682 million climbed 13% year over year, while its adjusted earnings per share (EPS) of $0.78 jumped 24%. The company easily surpassed analysts' consensus estimates on both counts.
Perhaps more promising was management's guidance for 2026 revenue of roughly $2.855 billion and adjusted EPS of $3.17, both at the midpoint of Okta's guidance. Both were ahead of Wall Street's expectations.
After a high-profile security breach derailed the company's progress, Okta appears to be back on track, giving shareholders a boost of confidence in the process.
