To The Moon

$Okta Inc.(OKTA)$ is expected to show a rise in quarterly revenue when it reports results on 29 May for the period ending 30 April 2024.

Okta is expected to report a 16.7% increase in revenue to $604.339 million from $518 million a year ago. Okta's guidance on 28 Feb 2024, for the period ended 30 April, was for revenue between $603.00 million and $605.00 million.

Okta stock fell into a bear market after its euphoric surge following its previous earnings release. Okta investors are likely feeling uncertain, as we approach its earnings scorecard this week.

Okta faces intense competition against $Microsoft(MSFT)$ . However, it has also proven its business model. Given Okta's demonstrated profitability, management has the potential to outperform its cautious FY2025 guidance.

$80 Billion Annual Opportunity In Identity Verification

The first factor working in Okta's favor is that cybersecurity is effectively a necessity service. Hackers and robots do not take time off from trying to steal sensitive information, which means businesses with an online or cloud-based presence need to protect this information at all times regardless of how well or poorly the economy is performing.

Since Okta is a subscription-driven business, it means predictable operating cash flow in virtually any economic climate. Okta is making a name for itself as a provider of identity verification services. Its platform is cloud-native, and incorporates artificial intelligence (AI) and machine learning. While clearly not perfect, as evidenced by the recent breach, AI-driven security solutions have the ability to learn and evolve over time. Being based in the cloud should allow Okta to more effectively and efficiently spot and respond to potential threats.

If we looked at the identity verification as an $80 billion annual opportunity, Okta last earnings shows that it is only touching the surface of this market opportunity, so I looked forward to Okta as it is on track to its $2.2 billion in full-year sales in fiscal 2024 (Okta's fiscal year ends on 31 Jan).

But what I would be interested in is why Okta investors are feeling uncertain, it cannot be due to Microsoft competition and Okta business model of subscription has much higher potential growth, and cybersecurity defense is not one-off thingy. So I would like to share some observation that I have done.

Okta Stock Price Growth Compared To Microsoft

If we looked at how Okta has performed against Microsoft, we would discover that it is actually not declining as much, though, it is still having a lower gains than Microsoft.

But as the AI development mature, the need for especially identity cyber defenses would be much needed, and with Okta acquire Auth0, this has put them in much earlier stage of providing identity defense.

I would say we can look at how Okta would move correlate to Microsoft.

Investors Uncertainty Shown In Short Range Uptrend

In order to understand why investors are feeling uncertain about Okta, despite us seeing a nice gap up after its last earnings report on 28 Feb 2024, we could see that the rise was short-lived, as we saw selling pressure happening on 08 Mar 2024 based on the KDJ chart, though still trading above the 50-day period..

Another buying opportunity appear on 22 April 2024, but we saw another potential selling happening on 06 May 2024. Though the expectation for upcoming earnings have been pretty positive, but we are seeing the recent downwards trend in KDJ for Okta.

This does not bore well as we can see from the chart below, there is a nice upside before its last earnings report on 28 Feb, so I believe we would need to monitor closely today (28 May) to see if investors are planning to take profit, do take note that Okta is trading below the 50-day period now.

Selling Pressure Still Persists. MACD showing Downside Crossover

I decided to use another 2 indicators to confirm what I have observed from KDJ and EMA, it is observed from the chart below that even though there is a slight upside for Okta, but selling strength is building up.

We need to see the selling strength decreasing as seen in the prior before 28 Feb earnings, then we could have a chance of a gap up, as of now, investors are still uncertain whether Okta could show an increased revenue based on the demand of cybersecurity for AI either on cloud or on-premise.

Summary

No doubt the demand for cyber security on the AI space have been increasing, but Okta have an edge on identity security but it is not showing in its stock price, investors are still uncertain about this company potential.

I would focus to look at Okta management comment on the outlook and their strategy to capture the market while it is still not crowded.

Appreciate if you could share your thoughts in the comment section whether you think okta would be able to provide a better outlook on its growth since AI cybersecurity demand is on the rise?

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.