For Immediate Release
Chicago, IL – January 20, 2023 – Zacks Equity Research shares Okta OKTA as the Bull of the Day and Meritage Homes MTH as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Shell plc SHEL, Volta Inc. VLTA and Murphy USA MUSA.
Here is a synopsis of all five stocks:
Bull of the Day:
I last profiled Okta as the Bull of the Day in mid-October as shares slid to $50 per share.
It’s time to revisit this Zacks #1 Rank again after more positive moves in earnings estimates from analysts.
Okta is an $11 billion provider of identity security for enterprises. This is a key service where password security is a continuous vulnerability point.
Primary products consist of Okta IT and Okta for Developers. Okta IT Products include Single Sign-On, Mobility Management, Adaptive Multi-Factor Authentication, Lifecycle Management and Universal Directory.
Okta for Developers includes Complete Authentication, User Management, Application Programming Interface Access Management and Developer Tools.
Here’s what I wrote in October as shares collapsed to $50…
Estimates Higher, Stock Clobbered After Quarter Confusion and Management Moves
On August 31, Okta reported second-quarter fiscal 2023 adjusted loss of 10 cents per share, beating the Zacks Consensus Estimate by 66.67%. The company had reported a loss of 11 cents per share in the year-ago quarter.
Total revenues surged 43.2% year over year to $451.8 million and surpassed the consensus mark by 4.93%. The upside can be attributed to higher subscription revenues.
Subscription revenues (96.4% of total revenues) surged 43.6% year over year to $435.4 million. Professional services and other revenues (3.6% of total revenues) increased 32.7% year over year to $16.4 million.
While the company’s Q2 revenue was solid, leading indicators slipped and expectations for second half billings were lowered as Okta is facing some sales integration challenges with the recent Auth0 acquisition, with heightened attrition and some product confusion, to say nothing of a surprising sabbatical announcement from the COO.
And the implied growth of 19% from management projections is down from 27%.
OKTA shares got hit for 34% on September 1 after this report.
(end of October article excerpt)
What was so interesting after this quarter is how much the analysts retreated.
While 2022 EPS estimates naturally had to move higher on the big positive earnings surprise, there were upward revisions into 2023 too despite the company re-evaluating out-year targets.
In October, I noted that “Next year’s consensus leaped higher from a loss of 60-cents to a loss of only 31-cents. But analysts also downgraded the stock across the board on other factors.”
And what we saw was a herd of analysts lowering their estimates and growth expectations.
But now, after the most recent quarterly report, the spreadsheet jockeys are changing their tune…
Okta price target raised to $90 from $80 at Piper Sandler
Analyst Rob Owens continues to see multiple opportunities across his software universe, saying valuations appear “relatively de-risked and underlying trends prove resilient.” However, he believes there is still more bad news to come, especially on the economic front. As such, 2023 “potentially sets up as a stock picker’s year,” Owens tells investors in a research note. His top five ideas include Okta, Palo Alto, Crowdstrike, ServiceNow and CyberArk.
Okta price target raised to $80 from $72 at KeyBanc
Analyst Michael Turits raised the firm’s price target on Okta to $80 from $72 to reflect conversations with the channel and CIO respondents, and to reflect his updated outlook following survey response data. The analyst keeps an Overweight rating on the shares.
As you can see, the prospects for this key provider of “identity security” have rebounded considerably.
I will reiterate the same thing I wrote 3 months ago when I saw the value…
Bottom line on OKTA: With its unique market position, and buoyant topline growth of 28%, Okta should be a good long-term investment as it falls back to levels not seen since December of 2018.
What’s changed is that EPS estimates for this year have done a complete 180 — from projected losses of 32-cents to PROFITS of 31-cents!
This represents a 200%+ flip in profitability!
And this is derived from the topline climbing an unexpected leap above $2 billion, representing 16% growth.
New bottom line for OKTA: Shares look poised to breakout above $70-75 very soon. I would be on-board!
Bear of the Day:
Meritage Homes is a $3.5 billion home builder whose shares have risen strongly off of the bear market lows.
But the turn in optimism for home builders is shared among companies like KB Home and Lennar who are also in the cellar of the Zacks Rank at this time.
Meritage offers a variety of homes that are designed with a focus on entry-level and first move-up buyers. Operations span Arizona, California, Colorado, Texas, Florida, Georgia, North Carolina, South Carolina, Tennessee and Utah.
Based in Scottsdale, AZ, Meritage Homes Corporation is one of the leading designers and builders of single-family homes. The company primarily engages in building and selling single-family homes for entry-level, first-time, move-up, luxury and active adult buyers in historically high-growth regions of the United States.
Earnings Outlook Turns South
While 2022 revenues saw a climb to nearly 22%, the sad irony for 2023 is that analyst projections for the topline in 2023 are expected to fall almost 23%.
The numbers don’t lie here as topline estimates drop from $6.2 billion for 2022 to $4.8B for 2023.
More importantly for the Zacks Rank metric, EPS estimates drop over 50% from $26 to $12 this year.
This could be merely a function of analyst caution about housing markets going forward into the new year.
But it may also revolve around the steep rise in inflation and interest rates — that could also cause a recession — that have pushed many new home buyers to the sidelines.
Be sure to follow my colleague Tracey Ryniec who tracks all the housing data every week. I just had a conversation with her on my Mind Over Money podcast where she shared a ton of great insight and resources.
Shell (SHEL) Makes Another Splash in the EV Charging Market
A unit of Shell plc has agreed to purchase an electric vehicle (EV) charging company Volta Inc., for $169 million in cash. The acquisition is another pointer to the growing trend among major energy companies toward investments in the EV infrastructure space as demand for such vehicles continues to grow.
Per the deal, the London-headquartered energy major will pay 86 cents for each of Volta’s outstanding class A common stock. At Volta’s Tuesday’s closing stock price of 72.70 cents, the transaction values the company’s shares at an 18% premium.
Volta, which went public in 2021, primarily sets up charging points in retail parking lots with high traffic (shopping malls, grocery stores etc.) and provides free electricity to EV drivers. The company operates 3,050 EV chargers in the United States and Europe, and gets paid in the form of ads displays on chargers. But of late, it has been struggling with lack of cash and has seen its share price languish below $1 in the past few months. So precarious is the state of cash that the buyout agreement with Shell entails loans to Volta to see it through the closure of the deal, expected by June 30.
For Shell, the Volta deal is yet another step in its endeavor to diversify from oil and invest in green energy management. Europe’s largest oil company previously bought Greenlots — another company involved in EV charging and management — in 2019 and ubitricity — U.K.’s largest EV charging network — in 2021.
This Zacks Rank #3 (Hold) company, which consolidated its dual headquarters in London over The Hague and became a single UK entity last year, is slated to release fourth-quarter 2022 results on Feb 2. The current Zacks Consensus Estimate for Shell’s to-be-reported quarter is a profit of $2.12 per share.
Key Energy Picks
Meanwhile, investors interested in the energy sector might look at operators like Murphy USA, which has a Zacks Rank #1 (Strong Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Murphy USA: Over the past 60 days, this El Dorado, AR-based Murphy USA has seen the Zacks Consensus Estimate for 2022 improve 4%. MUSA, which surpassed third-quarter bottom-line estimates by 18.7%, is valued at around $6.1 billion.
Murphy USA has a trailing four-quarter earnings surprise of roughly 51%, on average. MUSA has seen its shares gain 35.9% in a year.
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Meritage Homes Corporation (MTH) : Free Stock Analysis Report
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