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Okta (OKTA) to Report Q3 Earnings: What's in the Cards?

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Okta, Inc. (OKTA - Free Report) is set to report third-quarter fiscal 2020 results on Dec 5.

For the quarter, Okta anticipates non-GAAP net loss in the range of 12-13 cents per share.  The Zacks Consensus Estimate for loss has remained steady at 12 cents per share over the past 30 days.

Okta expects revenues in the range of $143-$144 million, indicating growth of 35-36% year over year. The consensus mark for revenues is pegged at $143.6 million, indicating an increase of 36% from the year-ago quarter reported figure.

Notably, the company’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, with the average positive surprise being 43.3%.

Okta’s second-quarter fiscal 2020 adjusted loss of 5 cents per share was narrower than the Zacks Consensus Estimate of a loss of 10 cents and the year-ago quarter loss of 15 cents.

Total revenues surged 48.5% from the year-ago quarter to $140.5 million and surpassed the consensus mark of $131 million.

 

Okta, Inc. Price and EPS Surprise

 

Higher Expenses to Dent Profits

Third-quarter fiscal 2020 earnings are expected to have been weighed down by higher research and development expenses. Notably, non-GAAP research and development expenses surged 53.8% year over year to $31 million in second-quarter fiscal 2020 due to significant investments on Okta identity platform and integration network.

Additionally, sales and marketing expenses are likely to have increased owing to the company’s increased efforts to expand international presence and expenses from on-boarding additional customers.

Nevertheless, new product innovations, continued adoption and increasing use cases of identity solutions are expected to have driven Okta’s top-line growth.

Moreover, Okta’s revenues are expected to have benefited from increasing adoption of the company’s Identity solutions.

Notably, the company added 450 new customers in the last reported quarter, taking the total count to 7000. Additionally, the company added 80 net new customers with over $100,000 annual recurring revenues.

Key Developments in Q3

During the quarter, Cengage, the largest U.S. based provider of teaching and learning materials for higher education operating in 40 countries, chose Okta’s Workforce Identity and Customer Identity products to drive both IT modernization and digital transformation.

Okta announced strategic partnership with Atlassian, integrating Okta’s authentication technology into Atlassian cloud products.

Additionally, the company announced Okta DynamicScale solution, a new high capacity customer identity solution that enables transformative scale for large businesses and highly-trafficked apps and sites on the Internet, supporting traffic bursts and extended use of up to 500,000 authentications per minute.

Moreover, the company launched Okta SecurityInsights solution that provides global organizations with personalized security detection and remediation capabilities at the end user, administrator and customer network levels.

What Our Model Says

According to the Zacks model, the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — increases the odds of a positive earnings surprise.

Okta has an Earnings ESP of +2.04% and a Zacks Rank #4 (Sell), which makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some stocks you may consider, as according to our proven model, these have the right mix of elements to beat estimates this time around.

Dollar General Corporation (DG - Free Report) presently has an Earnings ESP of +1.23% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Costco Wholesale Corporation (COST - Free Report) currently has an Earnings ESP of +1.01% and a Zacks Rank of 2.

The Cooper Companies, Inc. (COO - Free Report) has an Earnings ESP of +0.74% and a Zacks Rank of 3 at present.

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