Okta (OKTA) Falls Despite Topping Q2 Estimates for Profit, Sales, and Guidance, Prompting Wall St. Upgrade
Shares of Okta (NASDAQ: OKTA) are down over 2.5% in pre-open Thursday despite the better-than-expected Q2 results delivered by the California-based company. The downside move promoted and upgrade on Wall Street.
Okta reported an EPS loss of $0.11, which was much better than a loss of $0.35 expected from the market analysts. Sales for the quarter came in at $316 million versus the consensus estimate of $296.23 million.
"In our first quarter as a combined company with Auth0, we're off to a fantastic start. Execution remained sharp with strong demand for Okta's workforce and customer identity solutions, as well as Auth0's developer-centric identity solutions. As organizations advance on their journey of improving their customers' digital experience, adopting zero-trust security environments, and deploying more cloud applications, they continue to turn to Okta to deliver an unmatched array of modern identity solutions to meet these challenges,” said Todd McKinnon, Chief Executive Officer and co-founder of Okta.
As for this quarter, the company is calling for negative EPS of $0.25 to $0.24, better than the expected loss of $0.34. Okta sees Q3 revenue of $325 million to $327 million, versus the consensus of $322.93 million.
Okta is projecting a full-year negative EPS of between $0.77 and $0.74, versus the consensus of negative $1.11. Full-year revenue is seen between $1.243 and $1.25 billion, versus the consensus of $1.22 billion.
Needham & Company analyst Alex Henderson said they were surprised that the stock fell following the report and upgraded shares to Buy as a result.
"Concerns that core Okta was slowing should be soothed as core delivered 39% y/y Revenue growth, 43% RPO growth, and 47% Total Calculated Billings growth adjusted for accounting changes," Henderson said as he set a $320 price target.
Stifel analyst Adam Borg raised the price target to $270.00 per share from $260.00 on the Hold-rated stock following a “solid” quarter.
“Okta delivered a solid F2Q22, with all key metrics above guidance and/or Stifel/street estimates given underlining strength across both organic Okta and Auth0 segments, supported by the ongoing favorable cybersecurity spending environment and strong execution. We are pleased to see Okta accelerate integration efforts for Auth0 given top-line and bottom-line synergies. Net/net, we continue to believe Okta remains well-positioned across workforce and customer IAM and support the Auth0 acquisition along with Okta's expanded moves into PAM and IGA markets next year. More broadly, we believe Okta has a number of drivers to sustain at-least 30%-35% revenue growth along with operating margin and free cash flow expansion in coming years. That said, we do not expect meaningful multiple expansion from current levels given our view of a full valuation along with increasing competition,” the analyst commented in a note.
Mizuho’s Gregg Moskowitz also hiked the PT to $290.00 per share from the prior $275.00 but reiterated a Neutral rating.
“OKTA reported a good F2Q, as organic billings growth of 47% Y/Y meaningfully beat our +38% forecast. In addition, Auth0 revenue and billings were much higher than we had modeled, although this very likely was mainly driven by conservative post-transaction assumptions. Also, the organic revenue beat, relative to our estimates, was less than we have been accustomed to. Looking forward, we continue to believe OKTA’s technological and GTM advantages versus most peers are significant. We also remain bullish on OKTA's fundamentals, although we'd like to see some evidence of consistent strong execution inclusive of Auth0,” Moskowitz commented in a client note.