Okta Stock is Digging Itself a Bottom

Enterprise identity solutions provider Okta NASDAQ: OKTA stock has been on a nasty downtrend since peaking out at $294 in February 2021. Cybersecurity is a constant in the headlines as organizations are placing a higher priority on securing their data. Identity management is at the forefront of enterprise security management. The $80 billion identity management segment is growing due to three major tailwinds including the adoption of Zero Trust security, digital transformation, and deployment of cloud and hybrid IT. The growing instances of security breaches make for a tumultuous environment for organizations which serves as a boon to Okta. The Company now has nearly 30% of the Global 2000 as clients. Prudent investors seeking a foothold in a key segment of cybersecurity, identity management, can watch for opportunistic pullbacks in shares of Okta.

Fiscal Q4 2022 Earnings Release

On March 2, 2022, Okta released its fiscal fourth-quarter 2022 earnings report for the quarter ending in January 2022. The Company reported an earnings-per-share (EPS) loss of (-$0.18), excluding non-recurring items, versus consensus analyst estimates for a loss of (-$0.24), beating by $0.06. Revenues rose 63.2% year-over-year (YoY) to $383 million beating analyst estimates for $359.78 million. The subscription backlog grew 50% YoY to $2.69 billion. The current subscription backlog, also referred to as remaining performance obligations (RPO), is expected to be recognized through the next 12 months and was up 60% to $1.35 billion. Calculated billings grew 91% to $603 million YoY. Okta CEO Todd McKinnon commented, "Today, C-level executives and developers are increasingly turning to Okta to help provide their employees and customers the freedom to safely use any technology. We exited FY22 with accelerating top-line metrics driven by strong execution and robust demand across our workforce solutions and both Okta and Auth0 customer identity solutions. Okta brings an unparalleled platform of cloud-native identity management solutions to a massive market that continues to move towards us, propelled by the three mega-trends of cloud and hybrid IT, digital transformation, and zero-trust security.”

Mixed Guidance

Okta issued mixed guidance for fiscal Q1 2023 EPS to come in between (-$0.35) to (-$0.34) versus (-$0.20) consensus analyst estimates on revenues between $388 million to $390 million versus $374.90 million estimates. The Company expects fiscal full-year 2023 EPS between (-$1.27) to (-$1.24) versus (-$0.49) consensus analyst estimates. Full-year fiscal 2023 revenues are expected between $1.78 billion to $1.79 billion versus $1.75 billion analyst estimates.

Conference Call Takeaways

CEO McKinnon saw broad strength in core Okta and Auth0 cementing its leadership in the $80 billion cloud-native identity management market. He expounded on the three key megatrends driving its business including digital transformation, deployment of cloud and hybrid IT, and the adoption of Zero Trust security in an increasingly worsening environment for security breaches. The Company added a record 1,000 new clients to its growing roster of 15,000 clients. In Q4, the Company added 275 clients with annual contracts values (ACV) exceeding $100,000 growing its total to over $100,000 ACV clients to 3,100, up almost 60% YoY. The Company has nearly 600 clients with ACV over $500,000 and almost 200 customers with ACV over $1,000,000. He noted some examples of large enterprise clients including Fifth Third Bank, and the world’s largest infrastructure provider, Kyndryl and Carvana. The Company helped Block seamlessly integrate thousands of workers from its Afterpay acquisition to access internal applications. He articulately concluded, “We believe that in a few years from now, there will be just a few primary clouds that really matter inside an organization. Together with Auth0, we are establishing Okta as a primary cloud, and the standard for digital identity. We're doing this by adding more users, more customers, and increasing the use cases we can address, all of which accelerate network effects. Identity is the connective tissue to all of the other primary clouds as it facilitates choice and flexibility while enhancing security and reducing risk and other technologies.”

OKTA Price Trajectories

Using the rifle charts on the weekly and daily time frames enables a more precise near-term view of the price action playing field for OKTA stock. The weekly rifle chart formed an inverse pup breakdown after rejecting the $232.23 Fibonacci (fib) level and sold off through the $138.35 fib before staging a bounce. The weekly 5-period moving average (MA) fell through the weekly 200-period MA at $161.14 as it continues lower at $154.77. The weekly 15-period MA is falling at $181.51. The weekly lower Bollinger Bands (BBs) sit at $116.42. The weekly stochastic appears to be flat but possibly crossing down below the 10-band. The daily rifle chart is in a make or breaks with a slowly rising 5-period MA at $151.80 attempting to cross the 15-period MA at $154.16 as the stochastic forms a mini pup at the 40-band. The daily market structure low (MSL) buy triggers a breakout through $150.26. The daily lower BBs sits at $131.28. The daily 50-period MA is falling at $172.05 with upper BBs at $180.37. Prudent investors can watch for opportunistic pullback levels at the $142.45 fib, $138.35 fib, $132.18 fib, $127.54, $121.91 fib, $119.89 fib, $116.97, $112.50, and the $107.29 fib level.