What Happened?
Shares of identity management software maker Okta (OKTA) jumped 16.8% in the pre-market session after the company reported a "beat and raise" quarter. Revenue and EPS came in much higher than Wall Street's estimates during the quarter. It also raised full-year EPS guidance and beat analysts' full-year revenue guidance expectations. However, despite the promising outlook, there were cautious comments on the macro picture as the business continued to observe a challenging operating environment, with organizations scrutinizing budgets. Zooming out, we think this was still a decent quarter, given the challenging macro backdrop.
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What The Market Is Telling Us
Okta’s shares are not very volatile and have only had 6 moves greater than 5% over the last year. Moves this big are rare for Okta and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 2 days ago when the stock gained 5.7% on the news that Morgan Stanley upgraded the stock's rating from Equal Weight (Hold) to Overweight (Buy) and raised the price target from $92 to $97. The most recent channel check conducted by the research team revealed a stabilizing demand environment and easing competition. Adding to the narrative, the analysts provided constructive product updates: "Further, our channel conversations have skewed positively for OIG (Okta Identity Governance), and we believe this offering could reach $100M in Annual Contract Value (ACV) by Q4."
Okta is down 0.9% since the beginning of the year, and at $86.18 per share, it is trading 22.7% below its 52-week high of $111.49 from March 2024. Investors who bought $1,000 worth of Okta’s shares 5 years ago would now be looking at an investment worth $707.25.
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