3-7-19 Option trading OKTA down 10.00 85 dollar put options
Okta (OKTA) is under pressure after the close (-8%) following its Q4 (Jan) report and guidance. Here’s our quick take.
• It was a good JanQ result with a $0.04 beat and nice revenue upside.
• However, the guidance was not great. While revenue guidance for both Q1 (Apr) and the full year FY20 are well above consensus, the EPS guidance for both periods is well below consensus. So this is truly some mixed guidance.
• Okta provides few clues in the press release. But we surmise that demand is not the problem based on the revenue upside. However, the weak EPS guidance makes us think that Oktais going to spend more to grow the business.
• The thing with Okta is that investors have been wanting to see them turn a profit. Based on this guidance, that timetable is seeming to get pushed out further.
• The FY20 non-GAAP EPS guidance of $(0.53)-(0.48) is well below consensus of $(0.24). Analysts have modeled to roughly breakeven (a small loss) in FY21. But now with this guidance, does that rough breakeven milestone get pushed back a year? Perhaps FY22 now? We will see how analysts update their models, but the quick take is that this may be the case.
• Bottom line, there is no question that Okta is growing quickly and they are in an attractive niche in cybersecurity. However, with the stock trading at a high valuation (around 15x sales), investors are going to be disappointed with breakeven looking like it’s going to get pushed back.
• Okta is likely to fill in details on the call, but our initial take is that profitability is going to take longer than expected and investors are not happy about it.
• Stock at $74.84 (-8%).
• Okta: Quick earnings analysis; looks like profitability will take longer than expected (81.21 +1.23)