Okta Inc. (OKTA) saw deceleration in growth over the past year after some healthy gains in 2020. Hedge funds were actively selling the stock in the third quarter of 2021, though the company still rose on the WhaleWisdom Heatmap to a ranking of 23 from 24. Overall, the stock outperformed the S&P 500, increasing by approximately 95.3% compared to the S&P’s gain of about 47.9% over the past 2-years.
Okta is an access management company that provides identity management solutions for businesses, enterprises, educational institutions, and government agencies. Okta’s cloud software helps its customers manage and secure user authentication while allowing developers to build identity controls into applications. Amidst the coronavirus pandemic, there has been an increased need for identity management services. The pandemic helped shift work habits so that a more significant number of employees now work remotely on a permanent or hybrid basis. With a switch to more home offices, some employees may not have the same level of security as their prior corporate office firewall provided, bringing more appeal to access management services.
Mixed Results from Hedge Funds and Institutions
Okta’s third-quarter activity included hedge funds selling. The aggregate 13F shares held by hedge funds decreased to about 25.9 million from 26.2 million, a change of approximately 1.4%. Of the hedge funds, 40 created new positions, 61 added to an existing one, 24 exited, and 48 reduced their stakes. In contrast to hedge funds, institutions were buying and increased their aggregate holdings by about 3.0%, to approximately 114.2 million from 110.8 million.
Favorable Revenue Estimates
Analysts expect to see losses narrow in 2022 and 2023, bringing earnings per share down to $0.52 by January 2022 and $0.49 by January 2023. Additionally, estimates are encouraging for revenue with an anticipated rise by January 2022 to approximately $1.3 billion; this momentum may continue into 2023, with revenue estimated at $1.8 billion by January 2023. Okta’s 13F metrics show slowed momentum for its stock value despite revenue growth.
Conservative Price Targets
Analysts cut price targets, believing that Okta’s stock was valued too high following third-quarter results. Deutsche Bank analyst Patrick Colville lowered the firm’s price target to $250 from $270 while maintaining a Buy rating on shares. Rudy Kessinger of DA Davidson also kept a Buy rating but gave Okta a price target of $260, down from $315. Kessinger noted that the company had better than expected revenue growth and referenced that Okta’s recent acquisition of Auth0, the adaptable authentication platform, appeared to be going well. JP Morgan lowered their price target on Okta to $230 from $295, with analyst Sterling Auty maintaining a Neutral rating on shares following Q3 results. Jonathan Ruykhaver of Baird & Co. lowered the firm’s price target to $230 from $265 and kept a Neutral rating on shares. Ruykhaver acknowledged positive management commentary while remaining cautious about Okta’s growth.
Okta’s performance has waned over recent months, but predictions for continued revenue growth remain encouraging. As businesses seek to assure the public that secure cloud services and digital transactions are the way of the future, Okta’s products and services are likely to see increased demand. The technology stock holds long-term potential for patient investors.