Shares of Okta (NASDAQ: OKTA) barreled out of the gate Tuesday, gaining as much as 19.9%. As of 11:54 a.m. ET, the stock was still up 18.4%.
The catalyst that sent the cybersecurity specialist higher was its quarterly earnings results, which provided upbeat news for shareholders.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »
A swing to profitability
For its fiscal 2025 fourth quarter (ended Jan. 31), Okta generated revenue of $682 million, up 13% year over year, fueled by subscription revenue that grew 13% to $670 million. Cost controls increased its bottom line, as Okta swung from a net loss of $44 million to a profit of $23 million. This resulted in adjusted earnings per share (EPS) of $0.78. Analysts' consensus estimates were calling for revenue of $668 million and EPS of $0.74, so Okta cleared both hurdles with ease.
Okta's robust cash generation continued, with record operating cash flow of $286 million and free cash flow of $284 million, up 64% and 71%, respectively.
The company's customer metrics also improved, with total customers of 19,650, up 4% year over year, though Okta's most lucrative customers -- those spending $100,000 annually -- climbed 7% to 4,800. At the same time, the company's trailing-12-month dollar-based net retention rate clocked in at 107%, illustrating that existing Okta customers are expanding their relationships with the company.
Okta's remaining performance obligation (RPO) -- or contractually obligated sales not yet recognized as revenue -- is also climbing. Current RPO of $2.25 billion increased 15% year over year, while its total RPO of $4.2 billion increased 25% -- accelerating from 19% growth sequentially. Since RPO provides insight into future results, it shows that Okta's sales have begun to reaccelerate.
The future looks bright
For the first quarter, the company is forecasting revenue of about $679 million, up roughly 10% at the midpoint of its guidance, while guiding for full-year revenue of $2.85 billion, also an increase of about 10% and well ahead of expectations of $2.79 billion. Management has a history of issuing conservative guidance, so the results could actually be better.
After hitting a rough patch, Okta appears to have stabilized its growth, giving shareholders a boost of confidence in the process. The stock is currently selling for roughly 30 times next year's expected earnings, a valuation that is beginning to look interesting.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
- Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $295,759!*
- Apple: if you invested $1,000 when we doubled down in 2008, you’d have $45,128!*
- Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $525,108!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of March 3, 2025
Danny Vena has positions in Okta. The Motley Fool has positions in and recommends Okta. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
