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Okta's (OKTA) Q1 Earnings Coming Up: What Lies in Store?

Zacks Equity Research

Okta, Inc. OKTA is set to report first-quarter fiscal 2020 results on May 30.

Notably, the company’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, with the average positive surprise being 45.6%.

Okta’s fourth-quarter fiscal 2019 adjusted loss of 4 cents per share was narrower than the Zacks Consensus Estimate of a loss of 27 cents and the year-ago figure of 8 cents. Total revenues surged 49.9% from the year-ago quarter to $115.5 million and surpassed the consensus mark of $107.9 million.

Moreover, Okta added 500 new customers taking the total count to 6,100. Additionally, the company added 101 net new customers with over $100,000 annual recurring revenues in the last reported quarter taking the total count to 1,038.

Okta, Inc. Price and EPS Surprise

 

Okta, Inc. Price and EPS Surprise

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

For the fiscal first quarter, the Zacks Consensus Estimate for loss has remained steady at 21 cents per share over the past seven days. The figure indicates a decline of 133.3% from the year-ago period. Management anticipates non-GAAP net loss per share in the range of 21-22 cents.

The Zacks Consensus Estimate for revenues is pegged at $116.7 million, indicating an increase of 39.5% from the year-ago period reported figure. Management expects revenues in the range of $116-$117 million, indicating year-over-year growth rate of 39-40%.

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

Continued Investments May Hurt Profitability

Okta’s continued investments in its solutions to attract customers may increase research and development expense in first-quarter fiscal 2020. Notably, non-GAAP research and development expenses surged 63.7% year over year to $23.2 million in fourth-quarter fiscal 2019 due to significant investments in Okta identity platform and integration network.

Additionally, sales and marketing expense may increase in the to-be-reported quarter owing to the company’s increased international presence and expenses from on-boarding additional customers. This is likely to hurt profits.

Increasing Use of Identity Solutions, Acquisition May Aid Okta

Okta’s first-quarter fiscal 2020 revenues are expected to benefit from increasing adoption of the company’s Identity solutions. In the to-be-reported quarter Brink's Company BCO and Hitachi chose Okta’s identity solutions to be more digitally advanced and to consolidate all customers' applications without sacrificing security or stability.

Additionally, with Okta launching Okta Hooks in first-quarter fiscal 2020, developers can easily customize the Okta Integration Network thereby enhancing the capability of Okta Identity Cloud. This is likely to boost customer base additions in the to-be-reported quarter.

Moreover, the company continues to invest in security to help its customers “centralize access controls” and eliminate “identity-based attacks.” This is likely to boost Okta’s business relationship with existing customers.

Further, the acquisition of Azuqua in first-quarter fiscal 2020 may help Okta users easily automate and integrate identities between apps and services for all the parties involved. The acquisition may have also helped Okta provide innovative and valuable solutions to customers.

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

Okta has a Zacks Rank #4 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 earnings beat in their upcoming releases:

Verint Systems Inc. VRNT has an Earnings ESP of +2.75% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Science Applications International Corporation SAIC has an Earnings ESP of +7.76% and a Zacks Rank #1.

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