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OKTA Gears Up to Report Q3 Earnings: What's in the Cards?

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Zacks Equity Research
·4 min read
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Okta, Inc. OKTA is set to report third-quarter fiscal 2020 results on Dec 2.

For the fiscal third quarter, Okta anticipates non-GAAP net loss in the range of 1-2 cents per share.  The Zacks Consensus Estimate for loss per share has remained steady at 2 cents over the past 30 days.

Okta expects revenues in the range of $202-$203 million, indicating growth rate of 32-33% from the year-ago period reported figure. The Zacks Consensus Estimate for revenues is pegged at $202.6 million, indicating an increase of 32.4% from the year-ago quarter reported figure.

Notably, the company’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, with the average earnings surprise being 158.2%.

Okta, Inc. Price and EPS Surprise

Okta, Inc. Price and EPS Surprise
Okta, Inc. Price and EPS Surprise

Okta, Inc. price-eps-surprise | Okta, Inc. Quote

Continued Investments to Dent Profits

Okta’s continued investments in its solutions are expected to have pushed up third-quarter fiscal 2020 research and development expenses. Notably, non-GAAP research and development expenses increased 25.7% year over year to $38.9 million in second-quarter fiscal 2020 due to significant investments on Okta identity platform and integration network.

Additionally, sales and marketing expense is anticipated to be higher owing to the company’s increased international presence and expenses from on-boarding additional customers.

On Sep 1, Okta announced its continued global expansion with the launch of a office in Japan and the hiring of its first Japan country manager, Takashi Watanabe. This indicates its focus on international expansion and increasing customer base.

These are expected to keep third-quarter fiscal 2020 margins under pressure.

However, continued adoption and increasing use cases of identity solutions are expected to aid Okta’s top line in the to-be-reported quarter.

Okta’s third-quarter fiscal 2020 revenues are expected to benefit from increasing adoption of the company’s Identity solutions. In the to-be-reported quarter, Okta announced partnership with salesforce.com, inc. CRM and new integration between the Okta Identity Cloud and Salesforce Work.com designed to help organizations and communities build trust with their employees and customers.

Key Q3 Developments

On Oct 7, Okta announced the launch of Okta Customer Identity Workflows, a new product that enables product builders and IT professionals to automate the most complex digital transformation identity processes.

Moreover, the company announced Customer Identity and Okta Access Gateway Specializations within Okta Partner Connect.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP.  But that’s not the case here.

Okta has a Zacks Rank #3 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some companies, which, per our model, have the right combination of elements to post an earnings beat in their upcoming release.

Signet Jewelers Limited SIG has an Earnings ESP of +13.95% and currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Toronto-Dominion Bank TD has an Earnings ESP of +3.63% and holds a Zacks Rank of 2, at present.

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