Why the Profit on Okta Stock?
Okta Inc (NASDAQ: OKTA) is a leader in the lucrative cybersecurity industry, but multiple
execution issues have plagued the company lately. At this point, Okta is a
risky bet that will only pay off if management can improve the company's
Despite the rapid growth
of Okta's end market of access and identity management, investors have
aggressively sold the stock so far this year. Unfortunately, things didn't get
any better after the company released its earnings results for the second
quarter of fiscal 2023, as investors dropped the stock by nearly 34%.
At issue is
the performance of Okta's sales teams in the wake of combining with
newly-acquired identity platform Auth0 (a $6.5 billion deal that closed earlier
teams battled through a muddy process, and in turn saw an increase in
attrition. That triggered a cut to full year bottom line guidance for Okta
several weeks ago, which was not well-received in a jittery stock market.
is now down 72.5% year to date versus a 26.5% drop for the Nasdaq Composite.
The Profits Explained.....
Entered the Okta Inc stock trade on Thursday, September 15, 2022 at $2.93.
Exited the trade the next day, Friday, September 06
for $4.40, for a potential profit of 50%.
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provides identity solutions for enterprises, small and medium-sized businesses,
universities, non-profits, and government agencies in the United States and internationally.
offers Okta Identity Cloud, a platform that offers a suite of products and
services, such as Universal Directory, a cloud-based system of record to store
and secure user, application, and device profiles for an organization; Single
Sign-On that enables users to access applications in the cloud or on-premise
from various devices; Adaptive Multi-Factor Authentication provides a layer of
security for cloud, mobile, Web applications, and data; Lifecycle Management
that enables IT organizations or developers to manage a user's identity
throughout its lifecycle; API Access Management that enables organizations to
secure APIs; Access Gateway that enables organizations to extend the Okta
Identity Cloud from the cloud to their existing on-premise applications; and
Advanced Server Access to secure cloud infrastructure.
provides Auth0 products, including Universal Login that allows customers to
provide login experience across different applications and devices; Attack
Protection, a suite of security capabilities that protect from malicious
traffics; Adaptive Multi-Factor Authentication that minimizes friction to end
users; Passwordless authentication enables users to login without a password
and supports in various login methods; Machine to Machine provides
standards-based authentication and authorization; private Cloud that allows
customers to run a dedicated cloud instance of Auth0; and Organizations that
enables customers to independent configurations, login experiences, and security
customer support, training, and professional services. It sells its products
directly to customers through sales force and channel partners.
was formerly known as Saasure, Inc. Okta, Inc. was incorporated in 2009 and is
headquartered in San Francisco, California.
More Reasons Why The Initial Weekly Options Put Trade
on Okta Inc Stock.....
software stocks, including Okta, fell yesterday after August's inflation
reading came in hotter than expected.
inflation report makes it more likely that the Federal Reserve will raise
interest rates by 75 basis points at its meeting next week, which in turn
increases the chances of a recession, as the Fed's goal is to bring inflation
under control, even if that means cooling off the economy.
stocks like OKTA tend to be more volatile than the broad market, and investors
have turned away from unprofitable stocks like Appian and Okta due to fears of
a recession and as rising interest rates have made long-dated earnings less
problems began once the Federal Reserve signaled its intentions to fight
inflation with interest rate hikes at its Dec. 15, 2021, meeting. Since then,
the stock has dropped nearly 71% -- a loss that was exacerbated by its high
net income (a measure of profitability) began a significant downward trend in
the middle of 2021, creating a nightmare scenario for Okta of shrinking
profitability in a rising interest environment.
rebound is NOT expected in Okta's stock as long as interest rates rise. Additionally,
the stock will fall further if its profitability continues to deteriorate.
first completed its merger with Auth0 in May 2021, it looked like the perfect
marriage. Okta was a leader in workforce identity solutions, and Auth0 was a
leader in customer identity and access management (CIAM). Consequently,
management believed that adding Auth0 as a complementary piece could establish
Okta as the most dominant company in the identity and access management
Shortly after the acquisition, management optimistically released
long-term growth projections for the combined company of $4 billion in revenue
by the fiscal year 2026. However, the marriage between the two companies has
gotten off to a rocky start, and its $4 billion revenue projection has recently
been called into question, for two reasons....
1. First, the company was overly optimistic about how fast it could
integrate both companies' sales teams, especially since the Okta and Auth0
marketing plans were radically different.
2. The second reason the company is less confident in its original
revenue projections is that the merged company is losing salespeople much
faster than management wants, with most of the loss coming from former Auth0
McKinnon announced on the company's Aug. 31 earnings call that Frederic
Kerrest, the executive vice chairman and chief operating officer, who also
co-founded Okta, is taking a one-year sabbatical beginning Nov. 1. Kerrest will
remain on the board during his leave, but McKinnon did not explain how the
company planned to replace his COO position.
Then in a
one-two punch, McKinnon said that Chief Product Officer Diya Jolly is leaving
the company -- notable because she is responsible for helping align Okta's
product teams with its new sales strategy. The company plans on splitting
Jolly's role between two people. In the future, one person will run a product
strategy for the customer identity cloud and another for the workforce identity
the market disliked these two key executives leaving during a critical period
for the company.
Okta, for example, said in its most recent earnings report that sales
cycles were starting to lengthen, meaning its customers were becoming more
cautious. That was one of the reasons why shares of the cloud identity stock
plunged on the report, and part of the reason why the company said it was
reevaluating its long-term growth target of $4 billion in revenue by fiscal
2026, which ends in January 2026.
Director Robert L. Dixon, Jr. sold
400 shares of Okta stock in a transaction on Thursday, September 8th. The stock
was sold at an average price of $60.10, for a total value of $24,040.00.
Following the transaction, the director now directly owns 3,441 shares of the
company’s stock, valued at $206,804.10.
Colville of Deutsche Bank and Shebly Seyarfi of FBN Securities, both of
whom notably reduced their price targets on Okta stock last week.
feels the company is worth $90 per share, down from his previous $130 target,
while Seyarfi's new price tag is $110, down from $160. Despite the slices, both
men are maintaining the equivalents of buy recommendations on Okta shares.
reasons why the analysts reduced their price targets weren't immediately
apparent. While investors overreacted to the latest Okta developments, they
were nevertheless right to be more cautious about the company. Revenue growth
is vitally important for young tech enterprises, and if there's a chance they
won't meet expectations, they can be punished severely by the market.
to the issued ratings of 26 analysts in the last year, the consensus rating for
Okta stock is Hold based on the current 14 hold ratings and 12 buy ratings for
OKTA. The average twelve-month price prediction for Okta is $117.80 with a high
price target of $260.00 and a low price target of $65.00.
could be bumpy in the short term. Therefore, the stock could continue to as
long as the Federal Reserve is raising interest rates.
Okta stock opened at $60.80 on Thursday. The stock has a fifty day
moving average price of $91.78 and a 200 day moving average price of $111.19.
Okta, Inc. has a 52 week low of $58.12 and a 52 week high of $272.27. The
company has a current ratio of 2.38, a quick ratio of 2.38 and a debt-to-equity ratio of 0.40.
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