Okta, Inc. (OKTA) has seen positive growth in recent months, after a brief dip in February and March 2020. The identity and access management company has dramatically outperformed the broader market, rising by approximately 92.3% as of November 13, 2020, to the S&P’s gain of about 11%.
Okta provides cloud software that helps strengthen businesses through secure user authentication into applications and web services and devices. The demand for Okta’s services has increased during the coronavirus pandemic due to a substantial increase in remote work. As organizations are being pushed to rely more on technology, there is a strong desire to keep virtual connections with workforces and customers secure and efficient. One of Okta’s services, single sign-on solution, has become quite popular. It allows users to log into multiple systems using one centralized process. Additionally, the stock has seen an added benefit from its recent announcement in October to partner with Salesforce.com, Inc. (CRM).
Okta Turns Heads
Okta has the attention of both hedge fund managers and institutions. Looking at activity by the top hedge funds in the second quarter, the aggregate 13F shares held increased to about 14.4 million from 12.8 million, an increase of approximately 12%. Of the hedge funds, 51 created new positions, 40 added to existing holdings, 22 exited, and 31 reduced their stake. Institutions also increased their aggregate holdings, increasing by about 2% to approximately 95 million from 93.2 million.
Optimistic Multi-Year Estimates
Analysts anticipate continued growth in revenue from 2021 through 2023, with a forecasted annual increase in a range of approximately 29% to 37%. This would result in approximately $803.1 million in January 2021 and increasing to an impressive $1.35 billion in 2023. The strong revenue growth will also bring earnings up to $0.58 per share in 2023, up from a loss of $0.01 for 2021.
Also, Guggenheim Investments raised its price target on Okta by $30, to $230 from $200. While billings growth has slowed down, which may be due to timing issues, there seems to be optimism for improved momentum. Additionally, Canaccord Genuity also has a favorable outlook for the stock and raised the price target to $210 from $190 while offering a Hold rating on shares. Canaccord expects the remote work tailwind to continue for Okta and cites that the company is uniquely positioned for long-term success.
Bright Outlook Ahead
The future is looking bright for Okta. The recent partnership with Salesforce, as well as analysts’ multi-year forecast, are very encouraging. While there are some valuation concerns for the stock, there is also positive momentum due to the remote work tailwind. Which is likely why hedge funds have moved briskly into the stock.