Okta, Inc. (OKTA) is about to face the music on Tuesday evening when it reports third-quarter results, and Wall Street's sharpest minds have been doing some recalibrating before the numbers drop.
The Santa Clara, California-based identity and access management company is expected to post earnings of 76 cents per share for the quarter, which would represent a solid jump from the 67 cents it earned in the same period last year. Revenue estimates sit at $730.44 million, up from $665 million a year earlier, according to market data.
That's the good news. The more interesting story is what's been happening with analyst price targets lately—they've been falling faster than enthusiasm at a cybersecurity conference after a major breach.
A String of Downgrades (But Not Really)
Here's the peculiar thing: most of these analysts still like the stock. They're just not quite as excited about where it's headed. Let's break down what some of the most accurate forecasters on Wall Street have been saying:
JP Morgan's Brian Essex, who sports a 64% accuracy rate, kept his Overweight rating on Dec. 1 but trimmed his price target from $140 down to $115. That's nearly an 18% haircut.
Jefferies analyst Joseph Gallo, accurate 68% of the time, maintained his Hold rating on Nov. 25 but took his target from $105 to $90. Barclays' Saket Kalia—the most accurate of the bunch at 76%—also stuck with his Equal-Weight rating on Nov. 18 while slashing his target from $112 to $95.
The pattern continues with Cantor Fitzgerald's Jonathan Ruykhaver (66% accuracy) cutting from $130 to $115 on Nov. 24, and Mizuho's Gregg Moskowitz (68% accuracy) trimming from $120 to $110 on Nov. 17. Both maintained Overweight and Outperform ratings, respectively.
Context Matters
To be fair, Okta did deliver some positive momentum recently. Back on Aug. 26, the company reported second-quarter revenue of $728 million, which beat analyst estimates of $712.01 million. That's the kind of performance that usually generates enthusiasm.
Yet shares rose just 0.4% on Monday to close at $80.64—well below where many of these analysts think it should trade, even with their reduced targets. The gap between current prices and analyst expectations suggests either Wall Street is cautiously optimistic about a rebound, or investors aren't buying what the analysts are selling just yet.
With earnings landing after Tuesday's close, we'll soon find out whether this wave of target cuts was prudent caution or excessive pessimism.
