Cybersecurity leader Okta, Wednesday's pick for IBD 50 Growth Stocks To Watch, has forged a new buy point as the company continues on a path to profitability. This makes OKTA one of the best stocks to watch in the stock market today.
San Francisco-based Okta specializes in identity verification. Its software monitors and manages privileged accounts. Hackers often target employees or management who have administrative access to company computer systems.
On Aug. 30, Okta reported better-than-expected fiscal second-quarter results, earning an adjusted 31 cents a share vs. a 10-cent loss in the year-ago period. Revenue rose 23% year over year to $556 million in the quarter ended July 31. That beat Wall Street views, as analysts who follow Okta stock had predicted an adjusted profit of 22 cents a share on revenue of $535 million.
"Okta delivered a strong set of results, beating expectations on all metrics and highlighted by strong execution," William Blair analyst Jonathan Ho said in a report. "Cost controls led to operating margin and free cash flow outperformance. While there are always risks associated with sales realignment and go-to-market efforts, we believe Okta is now benefiting from the changes put into place in prior periods."
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Okta Stock's IBD Ratings
While the company lost money its past two years, Okta is set to return to profitability this year. Meanwhile, Okta boasts a strong track record of big revenue growth. Due to that unprofitability, Okta stock shows a mild 81 Earnings Per Share Rating, according to IBD Stock Checkup. This rating takes into account EPS growth and stability of earnings over the past three years. The two most recent quarters are weighted more heavily.
Per FactSet estimates, Okta is expected to earn $1.17 a share this year, with growth of 26% in fiscal-year 2025.
OKTA stock displays a good 92 IBD Composite Rating, with mediocre long-term fundamentals coinciding with decent stock price performance since July.
OKTA Stock: One Of Best Stocks To Watch
Okta stock is building a cup-with-handle base that has a 90.73 buy point, per IBD MarketSmith pattern recognition. Shares rallied 1% midday Wednesday, looking to snap a four-day losing streak.
The stock is about 12% away from the official buy point, so be on the lookout for an earlier entry using a trendline.
Bullishly, the relative strength line jumped in early September, a sign of big outperformance vs. the S&P 500, but has been on the decline in recent sessions. The RS line measures a stock's price performance vs. the S&P 500 and is the blue line plotted on every IBD chart.
Improving fundamentals, along with bullish gains in recent months, make Okta stock one of the best stocks to watch in today's stock market.
However, the stock market outlook is a correction, with a 0%-20% recommended exposure range, per IBD's The Big Picture. That means that investors should be playing defense and focusing on refreshing watchlists until the market outlook improves.
Best Stocks To Buy And Watch
Three recent IBD 50 Stocks To Watch picks are among the best stocks to buy and watch.
| Company | Symbol | Buy point | Type of base |
|---|---|---|---|
| DraftKings | 32.65 | Cup with handle | |
| Arthur J. Gallagher | 237.64 | Tight area | |
| International Seaways | 48.40 | Cup with handle |
Source: IBD Data As Of Sept. 26, 2023
Follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on the best stocks to buy and watch and the stock market.
