Wednesday's IBD 50 Stocks To Watch pick, cybersecurity leader Okta, is approaching its newest buy point ahead of next week's earnings report. Okta stock rallied 0.8% midday Wednesday and is about 5% away from its entry.
San Francisco-based Okta specializes in identity verification. Its software monitors and manages privileged accounts. Hackers often target employees or management with administrative access to company computer systems.
On March 1, Okta said it earned 30 cents a share in the first quarter. It was the first quarterly profit in two years. Q1 revenue grew 33% to $510 million.
"The three mega trends that have driven Okta's business over the past several years: the deployment of cloud and hybrid IT; digital transformation projects; and the adoption of Zero Trust security, remain top priorities for organizations around the world," CEO Todd McKinnon said in the earnings call.
McKinnon continued, "These trends are more relevant than ever, and the role of identity has only grown in importance in helping organizations do more with less. Organizations that can address at least one, if not all three, of these trends will fare better over the long term."
Okta Stock Boasts Strong IBD Ratings
With the company coming off a yearly loss, Okta stock has a middling 74 out of 99 Earnings Per Share Rating, according to IBD Stock Checkup. This rating takes into account EPS growth and stability of earnings over the past three years, with the two most recent quarters weighed more heavily.
Okta doesn't have a three-year EPS growth rate because the company lost money in 2022 and 2017-2020, according to IBD MarketSmith. But the company is on track for big profits in fiscal 2024, which ends Jan. 31. FactSet estimates are for Okta to earn 76 cents a share, a far cry from 2023's 4-cent loss. Annual earnings are forecast to grow an additional 49% in fiscal-year 2025.
Okta stock shows a good-but-not great 89 out of 99 IBD Composite Rating.
Cybersecurity Leader One Of Best Stocks To Buy And Watch
Okta stock rose 0.8% midday Wednesday, moving higher after strong earnings results from Palo Alto Networks sparked gains in cybersecurity stocks. Okta shares are approaching an 87.98 buy point in a cup base.
Meanwhile, an early entry is also in play at 86.89, which is past Tuesday's high price.
Bullishly, the stock's relative strength line is nearing new highs ahead of a potential breakout. Remember, the RS line measures a stock's price performance vs. the S&P 500 and is the blue line plotted on every IBD chart.
If the market's down, good stocks will outperform by treading water or even rising. When the market rebounds, the stocks with the best relative strength should bounce back even stronger than the market.
With the stock market trend in a confirmed uptrend, investors should be on the lookout for top stocks breaking out. Despite Tuesday's losses, IBD's recommended exposure in stocks remains at 40% to 60% of your portfolio.
Boasting strong earnings estimates and solid price action in recent weeks, Okta stock is one of the best stocks to buy and watch in today's stock market.
Best Stocks To Buy And Watch
Three recent IBD 50 Stocks To Watch picks.
| Company | Symbol | Buy point | Type of base |
|---|---|---|---|
| Confluent | 29.82 | Cup base | |
| Axcelis Technologies | 136.48 | Cup base | |
| Fortinet | 69.17 | Flat base |
Source: IBD Data As Of May 24, 2023
Follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on the best stocks to buy and watch and the stock market.
