Okta Shares Rise 17% Year to Date: Buy, Sell or Hold the Stock?

Core Insights - Okta (OKTA) shares have appreciated 16.7% year to date (YTD), underperforming the Zacks Computer and Technology sector's return of 18.2, attributed to slowing federal business, challenging macroeconomic conditions, and stiff competition in the Identity and Access management domain [1][7][21] Performance Analysis - Okta shares have underperformed Microsoft (MSFT) but outperformed Palo Alto Networks (PANW) and Cisco Systems (CSCO) over the same timeframe, with Palo Alto Networks, Cisco, and Microsoft shares appreciating 9%, 14.3%, and 18.9%, respectively [2] - Okta stock is currently trading below the 50-day and 200-day moving averages, indicating a bearish trend [5] - Revenues rose 12.7% to $728 million in Q2, driven by large customers and U.S. public sector deals, with five of Okta's top 10 deals being with the U.S. public sector [7][14] Valuation Insights - Okta shares are considered overvalued, with a Value Score of D, trading at a forward 12-month price/sales (P/S) ratio of 5.29X, higher than Cisco's 4.47X [8] - For fiscal 2026, Okta expects revenues between $2.875 billion and $2.885 billion, indicating 10-11% growth from fiscal 2025, which reported 15% growth [18] Earnings Guidance - Okta expects fiscal 2026 non-GAAP earnings between $3.33 and $3.38 per share, suggesting 19.6% growth over fiscal 2025 [19] - For the third quarter of fiscal 2026, Okta anticipates revenues between $728 million and $730 million, indicating 9-10% year-over-year growth, with non-GAAP earnings expected between 74 cents and 75 cents per share [20] Strategic Positioning - Okta's strong portfolio includes new offerings such as Okta Identity Governance, Okta Privileged Access, and Identity Threat Protection, which are helping to gain market share and drive growth [12] - The company benefits from a rich partner base, including major players like Amazon Web Services, Microsoft, and Palo Alto Networks, enhancing its market position [13]