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Will Okta Stock Continue to Crush the Market Going Forward?

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Jun. 7 2019, Updated 12:36 p.m. ET

Okta stock 

Okta (OKTA), an enterprise identity management service provider, has generated staggering returns since its IPO in April 2017. Okta stock has risen 128% in the last 12 months. Since the beginning of 2019, the stock has risen 93.7%. Okta has generated a return of 426.0% since its IPO.

Okta stock is trading 0.5% below its 52-week high of $124.13 and 195% above its 52-week low of $41.88.

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First-quarter results

Last week, Okta announced its first-quarter results. The company reported revenues of $125 million—a rise of 50% YoY (year-over-year). The adjusted EPS was -$0.19. Analysts expected Okta to post revenues of $117 million and earnings of -$0.21 in the first quarter.

Subscription revenues accounted for 94.0% of the company’s sales. In the second quarter, Okta expected sales of $130 million—a rise of 37.0% YoY and an EPS of -$0.10. The estimates were above analysts’ sales estimates of $127.54 million and EPS estimates of -$0.14.

Okta’s customer base has risen by almost 5x in the last four years. Customers with an annual contract value of over $100,000 have grown 60.0% annually. Okta’s subscription sales have risen by 10x since 2014.

Although Okta still isn’t profitable, its EPS is estimated to grow 25.0% annually in the next five years. Okta isn’t a cheap stock. The stock is valued at 25x the sales. However, the stock is supported by strong growth metrics. Like other high-growth stocks, Okta seems like a solid long-term bet. Investors need to watch when the stock corrects in excess of 10%–15%.

Above the average estimate

Among the nine analysts tracking Okta, five recommended a “buy,” while four recommended a “hold.” There weren’t any “sell” recommendations for Splunk. Analysts have a 12-month average target price of $116.0, which indicates that Okta stock is trading at a premium of 6.0% to the average estimate.

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