TSP Weekly Tech Stock Update—Aug 31, 2024
This Week: Nutanix surprises to the upside, NOW record high, CrowdStrike maneuvers through the fallout, Elastic stumbles, MongoDB rebounds, Zscaler/GitLab earnings previews, Okta disappoints & more.
Hello from Rob…
—Shares of Okta (OKTA, $78.73) on Thursday plunged 17% after the provider of identity management & protection solutions issued FQ3 (Oct.) current RPO growth guidance of just 9%, 200 basis points below expectations. At the same time, Okta raised its FY’25 (Jan.) revenue growth outlook to 13% from 12%.
In FQ2, Okta’s current RPO of $1.995 gained 13%, easily topping the forecast of +10% to +11%. Total revenue rose 16% to $646 million, above the guidance range of $631 million to $633 million.
On the FQ2 call, Okta CFO Brett Tighe said the company factored in a challenging macro environment for FQ3 that’s consistent with what was experienced in the July quarter. “We also continue to incorporate some conservatism into our outlook for the remainder of this fiscal year related to potential impacts from last year's security incident.”
The tough macro is hurting Okta’s mix of new business versus upsells. Tighe said organizations continue to scrutinize budgets and rationalize their software spend, resulting in lower MAU assumptions in the Customer Identity business and fewer seats within the Workforce Identity business.
Following the FQ2 report, BofA downgraded Okta to ‘Underperform’ with a price target of $75, saying cost optimization trends are likely to outweigh positives for the next few quarters. On the other side, UBS lowered its target to $108 from $120, but kept its ‘Buy’ rating, calling out embedded conservatism in the guidance, which it thinks leaves upside potential in the back half of FY’25.
Okta shares, off 13% YTD, are trading at levels not seen since the middle of last December. The enterprise value now stands at just 4.7 times the FY’25 revenue guidance midpoint of $2.56 billion.
*Inside This Issue: Is The NVIDIA Post-Earnings Dip A Gift?
—Paid subscribers will receive the September 2024 PDF of Tech-Stock Prospector (TSP #271) via email on Tuesday, September 10.
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