RENEWAL-ANALYSIS-Trading Idea: Okta (Ak Yatırım/TradeAll/Uraz Çay)

Foreks - Okta Raised to Overweight at Morgan Stanley (NYSE:MS); PT $97

November 29, 2024 The cybersecurity company is set to announce its Q3’25 (Fiscal Year) financials on December 3. Okta's performance is significantly below CIBR’s, recording a -15.6% compared to CIBR’s +17.2%. The company has faced sharp sell-offs following its last two financial announcements. This negative divergence is primarily due to fears of competition (from MSFT) and the slowdown in revenue growth rather than the overall trend of its financials. In October, it introduced a platform for developers in the AI Agents space. This product could help mitigate competitive fears next year, potentially accelerating revenue growth again. I find it valuable that Okta is mentioned in the AI agents section of the 2025 technology trends report by CB Insights. The ability of security systems, used while connecting to applications, to function as a personal assistant in the future creates value. For example, it would be interesting and exciting to have an automatic command to log into the app and purchase a ticket if the price drops below X while connecting to airline X's app with Okta.

Following the sell-offs in its last two financial reports, the expected multiples have somewhat normalized. It is no longer considered expensive.

For Q3, expectations are a revenue of $649.6 million, an adjusted EBITDA of 59 cents, a total customer count of 19.5k, a dollar retention rate of 109.9%, and a gross profit margin of 81.2%, with an adjusted EBITDA of $131 million. I believe the company will exceed market expectations in terms of revenue and EBITDA.

Analysts' 12-month price targets ahead of the earnings announcement are listed below. If Okta can increase its revenue growth back to the 15%-20% range in 2025 with AI Agents, the stock will likely positively differentiate itself from competitors next year. The gross profit margin and retention rates are not currently problematic.

In the daily chart for Okta: If the company paints a positive picture regarding AI Agents in the teleconference and surpasses expectations with its Q3 financials, we could see a quick premium of 7%-10% in the stock. However, if things do not develop as I expect, the selling pressure on the stock may not easily diminish until the next earnings report.