Okta Stock Falls Despite Morgan Stanley Upgrade As Pre-Earnings Anxiety Takes A Toll: Retail Sentiment Dives To Year Low

Despite recording early gains, shares of Okta Inc. slipped nearly 1% by midday Tuesday, tracking a broader market downturn despite a "just right" reading from the Job Openings and Labor Turnover Survey (JOLTS).

The S&P 500 edged down 0.2% after hitting a record closing high on Monday, while the Nasdaq Composite added 0.1%, continuing its momentum. The Dow, however, dropped nearly 200 points, or 0.4%.

Even a Morgan Stanley upgrade to ‘Overweight’ from ‘Equal Weight’ couldn't lift Okta’s stock. The brokerage raised its price target to $97 from $92, highlighting a stabilizing demand environment, easing competition, and growth from new product launches as factors driving the bullish outlook.

The cybersecurity company is expected to report third-quarter earnings after the bell. Wall Street is expecting earnings of $0.58 per share on revenue of $649 million. 

Meanwhile, retail sentiment around the stock fell to a year-low to the ‘extremely bearish’ (20/100) territory backed by ‘extremely high’ (85/100) chatter.

Okta’s stock took a steep 17% dive in a single day after its second-quarter (Q2) earnings report in August. 

Despite surpassing revenue expectations with $646 million, the slowdown in subscription revenue growth—down to 17% year-over-year from 20% in the prior quarter—sparked concerns among investors about waning momentum.

In response to the Q2 earnings, BofA Securities downgraded the stock to ‘Underperform’ from ‘Buy,’ slashing the price target from $135 to $75. Analysts pointed to short-term challenges that outweigh the company’s long-term prospects.

Currently, 16 analysts rate Okta as a Buy, 24 recommend holding the stock, and one assigns it an Underperform rating, according to data from finchat.io.

On Stocktwits, investor sentiment remains cautious, with many awaiting clarity on key issues such as decelerating revenue growth, hurdles in the small and mid-size business market, and any potential upgrades to guidance.

The stock has dipped 8% so far this year, underperforming the broader markets. 

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