Okta Plunges 27% in 3 Months: Buy, Sell or Hold the Stock?

Okta OKTA shares have declined 27.2% in the past three months, underperforming the Zacks Computer and Technology sector’s return of 15.4% and the Zacks Security industry’s fall of 8.5%. The plunge in Okta’s shares can be attributed to slowing federal business, a challenging macroeconomic condition and stiff competition in the Identity and Access management domain. Okta shares have underperformed peers, including Palo Alto Networks PANW, Cisco Systems CSCO and Microsoft MSFT over the same timeframe. While Palo Alto Networks shares have declined 8.9%, Cisco and Microsoft shares have appreciated 3.6% and 13.4%, respectively.OKTA Stock’s 3-Month Performance Image Source: Zacks Investment Research Okta stock is currently trading below the 50-day and 200-day moving averages, indicating a bearish trend.OKTA Stock Trades Below the 50-Day and 200-Day SMAs Image Source: Zacks Investment Research Okta shares are also overvalued, as suggested by the Value Score of D. In terms of forward 12-month price/sales (P/S), Okta is trading at 5.36X higher than Cisco’s 4.41X.So, what should investors do with Okta stock at the current level? Let’s dig deep to find out.OKTA’s FY26 Guidance Reflects Slowing Federal BusinessFor fiscal 2026, OKTA expects revenues between $2.85 billion and $2.86 billion, indicating 9-10% growth from the figure reported in fiscal 2025. Uncertainty in the federal business, along with challenging macroeconomic conditions, is a headwind for the company. Okta expects fiscal 2026 non-GAAP earnings between $3.23 and $3.28 per share. The Zacks Consensus Estimate for Okta’s earnings has been steady at $3.28 per share over the past 60 days. The earnings figure suggests 16.7% growth over the figure reported in fiscal 2025. Okta, Inc. Price and Consensus Okta, Inc. price-consensus-chart | Okta, Inc. Quote Okta expects second-quarter fiscal 2026 revenues between $710 million and $712 million, indicating 10% year-over-year growth. The current portion of the company’s remaining performance obligations is expected in the 10-11% range. Okta anticipates non-GAAP earnings between 83 cents and 84 cents per share. For the second quarter of fiscal 2026, the Zacks Consensus Estimate for OKTA’s earnings has been steady at 84 cents per share over the past 60 days. The earnings figure suggests 16.7% year-over-year growth.Can a Strong Portfolio Boost OKTA’s Prospects?Okta’s strong portfolio that includes new offerings like Identity Governance, Privileged Access, Device Access, Fine Grained Authorization, Identity Security Posture Management, and Identity Threat Protection with Okta AI is expected to drive top-line growth over the long term. Okta is expanding its security portfolio with the launch of a new protocol, Cross App Access, which helps in securing AI agents. End users ultimately benefit as the latest protocol removes repetitive authorization consent screens and manages agent access for better security and compliance. The latest protocol reflects Okta’s commitment to protecting its customers deploying AI. The company’s focus on protecting non-human identities (NHIs) and developers building secure agents is noteworthy.Rich Partner Base and Strong Liquidity Bode Well for OKTAOkta is benefiting from a rich partner base that includes the likes of Amazon Web Services, CrowdStrike, Google, LexisNexis Risk Solutions, Microsoft, Netskope, Palo Alto Networks, Plaid, Proofpoint, Salesforce, ServiceNow, VMware, Workday, Yubico and Zscaler. The company has more than 7,000 integrations with cloud, mobile, and web applications and IT infrastructure providers as of April 30, 2025.Last month, Okta and Palo Alto Networks announced an expanded partnership that combines Okta Workforce Identity and Palo Alto Networks’ Prisma Access Browser. Integration between Identity Threat Protection with Okta AI and Palo Alto Networks AI-driven Cortex SecOps platform offers organizations a unified view of identity-related risks across their entire attack surface.Okta’s strong liquidity is a key catalyst. The company ended the first quarter of fiscal 2026 with $2.73 billion in cash, cash equivalents, short-term, and long-term investments. Net cash provided by operations was $241 million in the first quarter of fiscal 2026, while free cash flow was $238 million. For fiscal 2026, Okta raised free cash flow margin guidance to roughly 27%.Here’s Why OKTA is a Hold Right NowOKTA’s innovative portfolio and rich partner base are helping the company win clients. It exited first-quarter fiscal 2026 with roughly 20,000 customers, reflecting strong growth prospects for subscription revenues. Customers with more than $100 thousand in Annual Contract Value increased by 70 sequentially to 4,870. These factors bode well for long-term investors. However, a challenging macroeconomic condition, anticipated sluggishness in federal business and a stretched valuation make the stock a risky bet in the near term.Okta currently has a Zacks Rank #3 (Hold), which implies that investors should wait for a more favorable point to start accumulating the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Free Report: Profiting from the 2nd Wave of AI ExplosionThe next phase of the AI explosion is poised to create significant wealth for investors, especially those who get in early. It will add literally trillion of dollars to the economy and revolutionize nearly every part of our lives.Investors who bought shares like Nvidia at the right time have had a shot at huge gains.But the rocket ride in the "first wave" of AI stocks may soon come to an end. The sharp upward trajectory of these stocks will begin to level off, leaving exponential growth to a new wave of cutting-edge companies.Zacks' AI Boom 2.0: The Second Wave report reveals 4 under-the-radar companies that may soon be shining stars of AI’s next leap forward.Access AI Boom 2.0 now, absolutely free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Microsoft Corporation (MSFT): Free Stock Analysis Report Cisco Systems, Inc. (CSCO): Free Stock Analysis Report Palo Alto Networks, Inc. (PANW): Free Stock Analysis Report Okta, Inc. (OKTA): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks