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Sands Capital, an investment management company, released its Q3 2025 investor letter for the “Sands Capital Technology Innovators Fund.” A copy of the letter can be downloaded here. Technology Innovators focus on pioneering businesses worldwide that serve as key drivers or beneficiaries of significant, long-term technological changes. The fund returned 8.4% (net) in the third quarter compared to a 12.5% return for the benchmark, MSCI ACWI Info Tech and Communication Services Index. Despite concentrated lea ...

Core Insights - The Q3 earnings season has shown solid performance, with 95% of S&P 500 companies reporting results and an expected 13.4% increase in earnings per share, marking the fourth consecutive quarter of double-digit growth [2][3] Group 1: Earnings Performance - Analysts had initially expected a 7.9% increase in earnings per share for Q3, indicating a significant upward revision in expectations as the quarter progressed [3] - If the anticipated 13.4% earnings growth holds, it represents an acceleration from the 12% growth rate reported in Q2 [2] Group 2: Consumer Sentiment - Recent reports from Abercrombie & Fitch, Dick's Sporting Goods, and Burlington Stores indicate that softening consumer sentiment is affecting purchasing decisions [4] - Upcoming earnings reports from retailers such as Macy's, Dollar Tree, American Eagle Outfitters, and GameStop will provide further insights into consumer behavior as the holiday shopping season approaches [4] Group 3: Upcoming Reports - The first week of December will feature earnings reports from companies including Salesforce, CrowdStrike, MongoDB, Marvell, Okta, C3.ai, and Snowflake, which are expected to highlight ongoing trends in corporate performance [5]

Core Insights - The Zacks Security industry is experiencing strong demand for cybersecurity products due to the increasing need for secure networks and cloud-based applications, particularly in hybrid work environments [1] - Companies such as CrowdStrike, Fortinet, Okta, and Qualys are benefiting from these trends, although short-term growth may be hindered by economic slowdown and increased operating expenses [2] Industry Overview - The Zacks Security industry includes companies providing on-premise and cloud-based security solutions, addressing needs like identity access management, infrastructure protection, and malware analysis [3] - The industry is categorized into Computer Security, Cybersecurity, and Information Security, each focusing on different aspects of data protection [3] Major Trends - Rising cyber threats are driving demand for IT security solutions, with an increase in cyberattacks impacting both individual companies and national security [4] - Accelerated digital transformation and cloud migration are fueling growth, as various sectors become more reliant on technology, increasing their vulnerability to cyberattacks [5] - Macroeconomic headwinds may lead to delayed IT spending, as organizations conserve cash amid economic uncertainties [6] - High operating expenses related to R&D and sales efforts could pressure profit margins in the near term [7] Industry Performance - The Zacks Security industry ranks 56, placing it in the top 23% of nearly 250 Zacks industries, indicating solid near-term prospects [8] - The industry's earnings outlook is positive, with aggregate earnings estimates for 2025 revised up to $1.61 from $1.40 a year ago [10] - Over the past year, the industry has underperformed the broader Zacks Computer and Technology sector and the S&P 500, gaining only 8.6% compared to 29.5% and 16.5% respectively [11] Valuation Metrics - The industry is currently trading at a forward 12-month price-to-sales ratio of 12, higher than the S&P 500's 5.3 and the sector's 6.69 [14] Company Highlights - **Qualys**: A leading provider of information security solutions, benefiting from demand for cloud-based cybersecurity solutions. The consensus estimate for its 2025 earnings has been revised upward by approximately 8% to $6.91 per share [21][24] - **CrowdStrike**: A leader in endpoint protection and cyberattack response services, with a strong portfolio and growth driven by digital transformation. The consensus mark for its fiscal 2026 earnings remains at $3.67 per share [27][29] - **Fortinet**: Provides network security solutions and is benefiting from strong demand from large enterprises. The Zacks Consensus Estimate for its 2025 earnings has been revised upward by 13 cents to $2.65 per share [32][35] - **Okta**: A leading provider of identity security, experiencing increased traction in its solutions. The consensus mark for its fiscal 2026 earnings remains at $3.37 per share [38][40]

Core Insights - Analysts project Okta (OKTA) will report quarterly earnings of $0.75 per share, an increase of 11.9% year over year, with revenues expected to reach $730 million, up 9.8% from the same quarter last year [1] - The consensus EPS estimate has remained unchanged over the past 30 days, indicating a reassessment of projections by covering analysts [1][2] Revenue Estimates - The consensus estimate for 'Revenue- Subscription' is $713.53 million, reflecting a year-over-year increase of 9.6% [3] - 'Revenue- Professional services and other' is expected to reach $15.56 million, indicating an 11.1% year-over-year increase [4] Performance Obligations - Analysts estimate 'Current remaining performance obligations (cRPO)' at $2.26 billion, up from $2.06 billion a year ago [4] - 'Remaining performance obligations' are projected to be $4.17 billion, compared to $3.66 billion in the same quarter last year [5] Gross Margin and Customer Metrics - 'Gross margin- Subscription' is forecasted to reach 83.0%, an increase from 78.0% year over year [5] - The total number of customers is expected to reach 20,526, up from 19,450 in the same quarter last year [5] Market Performance - Okta shares have returned -9.1% over the past month, contrasting with the Zacks S&P 500 composite's -0.3% change [6] - With a Zacks Rank 3 (Hold), Okta is anticipated to mirror overall market performance in the near future [6]

Group 1 - Jefferies has lowered the target price for Okta from $105 to $90 while maintaining a "Hold" rating [1]

Core Insights - Okta's stock price increased by 2.54% to $81.16, outperforming the S&P 500's gain of 0.91% on the same day [1] - Over the past month, Okta's shares have declined by 12.07%, underperforming both the Computer and Technology sector's loss of 0.55% and the S&P 500's loss of 1.24% [1] Earnings Forecast - Okta is expected to report an EPS of $0.75 on December 2, 2025, reflecting an 11.94% increase from the same quarter last year [2] - Revenue is projected to reach $730 million, indicating a 9.77% rise compared to the previous year [2] Annual Estimates - For the entire year, the Zacks Consensus Estimates predict earnings of $3.37 per share and revenue of $2.88 billion, representing increases of 19.93% and 10.45% respectively from the prior year [3] Analyst Revisions - Recent adjustments to analyst estimates for Okta are crucial as they indicate changing business trends, with positive revisions suggesting an optimistic outlook [3] Zacks Rank System - The Zacks Rank system, which ranges from 1 (Strong Buy) to 5 (Strong Sell), has shown a strong track record, with 1 stocks averaging an annual return of 25% since 1988 [5] - Okta currently holds a Zacks Rank of 3 (Hold), with no changes in the EPS estimate over the past month [5] Valuation Metrics - Okta's Forward P/E ratio stands at 23.48, which is a discount compared to the industry average of 62.29 [6] - The PEG ratio for Okta is 1.35, while the industry average PEG ratio is 2.56 [6] Industry Context - The Security industry, part of the Computer and Technology sector, has a Zacks Industry Rank of 27, placing it in the top 11% of over 250 industries [7] - Strong industry rankings correlate with better stock performance, with the top 50% rated industries outperforming the bottom half by a factor of 2 to 1 [7]

Core Insights - Okta's stock closed at $80.11, reflecting a -1.14% change from the previous day, underperforming compared to the S&P 500's 0.38% gain [1] - The stock has decreased by 9.41% over the past month, significantly lagging behind the Computer and Technology sector's loss of 1.1% and the S&P 500's loss of 0.64% [1] Earnings Forecast - Okta's upcoming earnings report is scheduled for December 2, 2025, with an expected EPS of $0.75, representing an 11.94% increase year-over-year [2] - Revenue is projected to be $729.17 million, indicating a 9.65% growth compared to the same quarter last year [2] Fiscal Year Estimates - For the entire fiscal year, earnings are estimated at $3.37 per share and revenue at $2.88 billion, reflecting increases of +19.93% and +10.38% respectively from the previous year [3] Analyst Revisions - Recent revisions to analyst forecasts for Okta are crucial as they indicate changing business trends, with upward revisions suggesting positive sentiment towards the company's operations [4] Zacks Rank and Valuation - Okta currently holds a Zacks Rank of 3 (Hold), with a Forward P/E ratio of 24.04, which is a discount compared to the industry average of 66.53 [6] - The company has a PEG ratio of 1.38, lower than the Security industry's average PEG ratio of 2.69 [7] Industry Context - The Security industry, part of the Computer and Technology sector, has a Zacks Industry Rank of 51, placing it in the top 21% of over 250 industries [7] - Research indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [8]

Core Insights - Okta, Inc. has been recognized as a Leader in the 2025 Gartner Magic Quadrant for Access Management for the ninth consecutive year [1] Company Summary - Okta is identified as the leading independent identity partner in the access management sector [1] - The company provides tools that encompass authentication, authorization, single sign-on (SSO), and adaptive access capabilities for modern standards-based web applications [1]

Group 1: DraftKings and Flutter Entertainment - Wells Fargo initiated coverage of DraftKings (DKNG) with an Equal Weight rating and a price target of $31, expressing a bullish outlook on domestic online sports betting growth but indicating a wait for a better entry point due to near-term pressures and competition [1] - Flutter Entertainment (FLUT) was also initiated with an Overweight rating by Wells Fargo [1] Group 2: Carnival and Cruise Line Industry - Carnival (CCL) received an Overweight rating and a price target of $37 from Wells Fargo, which views the cruise sector as the most compelling within its gaming, leisure, and lodging coverage [1] - Norwegian Cruise Line (NCLH) and Royal Caribbean (RCL) were similarly initiated with Overweight ratings by Wells Fargo [1] Group 3: Cybersecurity Companies - Berenberg initiated coverage of Okta (OKTA) with a Buy rating and a price target of $145, considering both Okta and SentinelOne (S) as misunderstood stories with potential for re-rating [1] - CrowdStrike (CRWD) was initiated with a Hold rating and a price target of $600, with Berenberg noting that the market has already priced in its position at the top of the revenue duration curve [1] - Berenberg also started coverage of Rapid7 (RPD) and Qualys (QLYS) with Hold ratings [1] Group 4: Optical Communications - Mizuho initiated coverage of Lumentum (LITE) with an Outperform rating and a price target of $290, highlighting its role as a leading supplier in optical communications and lasers, benefiting from surging demand in artificial intelligence [1]