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Okta (OKTA) to Report Q4 Earnings: How Are Things Shaping Up?

Zacks Equity Research

Okta, Inc. OKTA is set to report fourth-quarter fiscal 2019 results on Mar 7.

Notably, the company’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, with the average positive surprise being 41.4%. In the last reported quarter, the company’s adjusted loss of 4 cents per share was much narrower than the Zacks Consensus Estimate of a loss of 11 cents.

Moreover, Okta’s top line beat the consensus mark in all the trailing four quarters. In third-quarter fiscal 2019, revenues came in at $105.6 million, beating the Zacks Consensus Estimate of $97 million and increasing 58% from the year-ago quarter.

For the fiscal fourth quarter, the Zacks Consensus Estimate for revenues and loss per share is pegged at $107.9 million and 8 cents, respectively. While revenues are expected to grow 38.8%, loss is likely to narrow down from 10 cents in the year-ago quarter.

Let’s see how things are shaping up prior to this announcement.

Okta, Inc. Price and EPS Surprise

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

Key Factors to Consider

Okta helps companies administer their workforce and customer identities through its cloud platform, which has more than 5,500 pre-built applications. The increasing adoption for its product is evident from the expanding customer base.

Additionally, Okta Identity Cloud’s capability to consolidate all customers' applications without sacrificing security or stability is a key catalyst. This along with the company’s ability to secure digital assets across a variety of users and technologies helped it to win 450 customers in third-quarter fiscal 2019.

Notably, companies like Deloitte and VMware VMW along with the U.S. Department of State chose Okta’s identity solutions in the last reported quarter. Additionally, total customer base increased 42% year over year to 5,600 mainly across enterprise customer base.

Moreover, momentum in cloud, digital transformation and increasing concern over cybersecurity threats helped Okta retain long-time customers like Adobe ADBE, Experian and Allergan AGN and attract new customers like Major League Baseball in third-quarter fiscal 2019.

Further, due to increase in upsell activities, customers with more than $100,000 annual recurring revenues increased 55% year over year to 937. Okta added 100 net new customers with over $100,000 annual recurring revenues in the last reported quarter.

However, increase in expenses to support business growth is negatively impacting profitability. In the last reported quarter, non-GAAP research and development expenses increased 52% year over year to $21.3 million due to significant investments in Okta identity platform and integration network. Additionally, headcount increased 29% year over year to 1473 to support business growth.

We believe that rise in expenses may continue to hurt profitability in the soon-to-be reported quarter.

Okta currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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