Okta's Stock Goes Up By More Than 14% Because Its Earnings Forecast Is Twice What Was Expected
Okta's Stock Goes Up By More Than 14% Because Its Earnings Forecast Is Twice What Was Expected

Okta’s Stock Goes Up By More Than 14% Because Its Earnings Forecast Is Twice What Was Expected

As the identity-management software company Okta Inc. beat estimates by a wide margin and executives predicted adjusted earnings that were more than double what Wall Street had expected, Okta Inc. shares soared in the extended session on Wednesday. Following a rise of 0.2% during the regular session to reach a closing price of $71.44, Okta’s stock OKTA, +0.21% increased by more than 14% during after-hours trading.

Okta Chief Executive Todd McKinnon, who was also a co-founder of the company, gave an exclusive interview to MarketWatch prior to the company’s conference call. In the interview, he stated that the outlook was based on the company’s “mission critical” security products and the building of its own ecosystem. MarketWatch is a subsidiary of News Corp.

According to what McKinnon told WSJ, “small and midsize enterprises are not buying as much as we thought.” He attributes this, in large part, to factors related to the macroeconomy. McKinnon gave the impression that he has personal experience in managing through difficult economic times, as he has been forced to lay off five percent of his own workers due to a reorganization of the company’s own investments.

According to him, the reason Okta is currently in a position to give a positive prognosis has everything to do with the company’s ability to retain customers.

The current projection calls for adjusted earnings of 11 or 12 cents per share for the first quarter, with revenue in the range of $509 million to $511 million; for the full year, the projection calls for earnings of 74 to 79 cents per share, with revenue in the range of $2.16 billion to $2.17 billion.

According to the results of a survey conducted by FactSet, analysts had anticipated a top line that was break-even on a per-share basis for the first quarter, with revenue of $498.5 million, and 36 cents a share for the year, on reven“We Have Hit The Hyper-space Button,” Said Marc Benioff, CEO Of Salesforceue of $2.15 billion.

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McKinnon told MarketWatch-

“Our business is tilted to upsells and cross-sells vs. new business, and it kind of makes sense when people are scrutinizing more things and double-checking every investment on the margin, it’s easier to go with a vendor you already have a relationship with”

On the call with analysts, Okta officials emphasized that customer-retention rates have stayed in the mid-90% range for quite some time and that the primary obstacle to obtaining new customers is their unwillingness to pull the trigger on a deal in the midst of economic uncertainty.

Okta's Stock Goes Up By More Than 14% Because Its Earnings Forecast Is Twice What Was Expected
Okta’s Stock Goes Up By More Than 14% Because Its Earnings Forecast Is Twice What Was Expected

McKinnon said on the conference call-

“I can see how customers would be a little bit more hesitant to engage in new partnerships at this time just because there is an unknown macro situation out there or the fear of the unknown, if you will,” 

“So, we do believe it is a little bit more on the new-business side, but we’re obviously actively working to try to sell both new business and upsells.”

Okta lost $153 million in the fourth quarter, or 95 cents per share. In the same time last year, the company lost $241 million, or $1.56 per share. After taking into account expenses for stock-based compensation and other things, the company made 30 cents per share, up from 18 cents per share the year before. From $383 million in the same quarter last year, sales went up to $510 million.

Analysts had predicted that the company would earn 9 cents per share on sales of $489.9 million. That was based on the company’s prediction that it would make 9 to 10 cents per share on sales of $488 million to $490 million. The Street thought there would be a loss. A quarter ago, Tighe gave a full forecast for fiscal 2024. The forecast called for an adjusted profit of between $2.13 billion and $2.15 billion on sales of $2.13 billion to $2.15 billion.

At the end of January, one analyst changed Okta’s rating from hold to buy. He did this because Okta has “generally happy customers,” which he thought would help when cloud-software customers had limited budgets.

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