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Okta (OKTA) to Report Q2 Earnings: What's in the Cards?

Zacks Equity Research

Okta, Inc. OKTA is set to report second-quarter fiscal 2020 results on Aug 28.

Notably, the company’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, with the average positive surprise being 37%.

Okta’s first-quarter fiscal 2020 adjusted loss of 19 cents per share was narrower than the Zacks Consensus Estimate of a loss of 21 cents. The figure was however wider than the year-ago reported loss of 9 cents.

Total revenues surged 49.8% from the year-ago quarter to $125.2 million and surpassed the consensus mark of $117 million.

Moreover, Okta added 450 new customers taking the total count to 6,550. Additionally, the company added 104 net new customers with over $100,000 annual recurring revenues in the last reported quarter.

For the fiscal second quarter, Okta anticipates non-GAAP net loss in the range of 10-11 cents per share. The Zacks Consensus Estimate for loss per share has remained steady at 10 cents over the past 30 days.

Okta expects revenues in the range of $130-$131 million, indicating growth of 37-38% from the year-ago period reported figure. The Zacks Consensus Estimate for revenues is pegged at $131.1 million, indicating an increase of 38.6% from the year-ago quarter reported figure.

Okta, Inc. Price and EPS Surprise

Continued Investments to Dent Profits

Okta’s continued investments in its solutions are expected to push up second-quarter fiscal 2020 research and development expenses. Notably, non-GAAP research and development expenses surged 76.2% year over year to $27.7 million in first-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 May 30, Okta announced opening of the cloud infrastructure provided by Amazon Web Services in Asia Pacific and an office in Germany. These indicate its focus on international expansion and increasing customer base.

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

However, continued adoption and increasing use cases of identity solutions are expected to aid Okta’s top line.

Okta’s second-quarter fiscal 2020 revenues are expected to benefit from increasing adoption of the company’s Identity solutions. In the to-be-reported quarter, Major League Baseball (MLB) and Zoom Video Communications chose Okta’s Identity Cloud solutions to be more digitally advanced for fans and to make application access more seamless for its global workforce, respectively.

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. Zacks Rank #4 (Sell) or 5 (Strong Sell) are best avoided.

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 deliver earnings beat in their upcoming releases:

Smartsheet SMAR has an Earnings ESP of +11.11% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Verint Systems VRNT has an Earnings ESP of +3.49% and a Zacks Rank #3.

lululemon athletica LULU has an Earnings ESP of +2.74% and a Zacks Rank #3.

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Click to get this free report Verint Systems Inc. (VRNT) : Free Stock Analysis Report lululemon athletica inc. (LULU) : Free Stock Analysis Report Smartsheet Inc. (SMAR) : Free Stock Analysis Report Okta, Inc. (OKTA) : Free Stock Analysis Report To read this article on Zacks.com click here.