Okta (OKTA) stock took a thrashing last week when the Q4 earnings results came out, revealing heavy losses. Shares went down 11% in just one week, a curious phenomenon as cybersecurity stocks have been roaring since the outbreak of the European conflict. But one analyst looks beyond the losses in search of the bigger picture – and that picture starts looking more like a bull the closer you look.
On the one hand, the digital identity services company reported net operating losses of $214 million for the quarter, and came to $848 million for FY21, up from $266 million in the prior year.
However, while Mizuho analyst Gregg Moskowitz acknowledges that Okta has been “a material underperformer,” he counters this by emphasizing Okta’s revenue growth of 63% year-over-year to $383 million. That well and truly beat consensus forecasts of $360. Much of the losses came from investments and the acquisition of Auth0, which contributed $56 million to the company’s overall revenue, while the Street estimate was $47 million.
The 5-star analyst names Okta an “Identity leader in a critical market.” Moskowitz believes that the company has a leg up from its peers due to its technological and GTM sophistication. “Our checks continue to indicate that Identity and Access Management (IAM) is routinely cited as a top area within security,” the analyst notes.
“And with cybercriminals increasingly targeting users to gain access to highly confidential and valuable information, we believe the importance of protecting user accounts will continue to rise. We would also emphasize that the recent Log4j vulnerability and the Ukraine invasion should further heighten the need for strong cybersecurity technology and processes. Moreover, we believe that momentum in the CIAM (Customer Identity and Access Management) market appears to be rising, and OKTA’s exposure to this attractive market has significantly increased,” the analyst summed up.
So what does this all mean for investors? Moskowitz upgraded his rating on OKTA from Neutral (i.e., Hold) to Buy, while reiterating his $225 price target. The figure suggesting shares will see 35% growth over the coming months. (To watch Moskowitz’s track record, click here)
Overall, the vast majority of analyst reviews are positive; 20 back a Buy rating while only 4 remain sidelined with Holds, providing this stock with a Strong Buy consensus rating. The Street’s average target currently stands at $233, implying shares will appreciate ~50% over the one-year timeframe. (See Okta stock analysis on TipRanks)
