Okta Jumps 9% As Cloud Demand Boosts Sales; Analyst Lifts PT

Okta stock jumped 8.6% in Wednesday’s extended market trading after the cloud-based enterprise identity-management platform provider reported better-than-expected 3Q results.

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The company’s 3Q revenues increased 42% to $217.4 million year-on-year mainly driven by increased adoption of cloud-based identity management solutions. The company’s quarterly revenues surpassed analysts’ expectations of $203.2 million.

Okta’s (OKTA) CEO Todd McKinnon said, “We are seeing the importance of a modern identity platform like the Okta Identity Cloud grow as businesses around the world accelerate their adoption of cloud-based applications and re-imagine their digital customer experiences.”

Okta posted adjusted earnings of $0.04 per share for the quarter, compared with a loss per share of $0.03 reported in the year-ago period. Quarterly earnings also topped the Street’s estimates of a loss of a penny. (See OKTA stock analysis on TipRanks)

Buoyed by strong quarterly performance, Okta raised its fiscal 2021 sales outlook to $822-$823 million from $800-$803 million. The company now forecasts adjusted EPS in the range of $0.04-$0.05, compared to its previous projection of loss per share of between $0.01 and $0.03. For 4Q, it anticipates revenues and adjusted loss in the range of $221-$222 million and $0.01-$0.02 per share, respectively.

Following the 3Q earnings, Canaccord Genuity analyst Michael Walkley raised the stock’s price target to $250 (5.5% upside potential) from $218. However, he maintained a Hold rating on the stock citing its valuation.

In a note to investors, Walkley said, “We believe Okta is exceptionally well run, uniquely positioned for long-term success, and has a strong balance sheet with $2.5B in gross cash. However, with the stock trading over 30x EV/Sales on C2021 estimates, we believe patient investors might have a better opportunity at a more favorable risk/reward level.”

Overall, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 4 Buys and 2 Holds. The average price target stands at $258.67 and implies upside potential of about 12.4% to current levels. Shares have gained about 99.5% year-to-date.