The Okta (NASDAQ: OKTA) stock price gained by more than 1.28% in extended hours after the company issued a strong outlook of its business. The stock, which dropped by more than 2.6% on Wednesday, rose to $225 after the regular session.

Okta sees strong growth

Okta has been one of the fastest-growing Software as a Service (SAAS) companies in the world. Indeed, its annual revenue had surged from more than $160 million in 2017 to more than $835 million in 2020. This growth has come at a cost as its losses have continued rising, reaching $266 million in 2020. 

This growth has been helped by the rising demand for the company’s cybersecurity products like single sign-on, universal directory, and advanced server access. Today, more than 10,000 global companies use these services, and the trend is growing. 

In a statement after the market closed, the company said it expects its revenue to grow by 30% to $1.06 this year. This growth will be driven by new products in the privileged access management and identity governance and administration sectors. The firm is chasing the $80 billion in the total addressable market in the privileged access industry. 

Okta has been under pressure

While Okta has done well over the years, the company’s stock price has been pressured lately. It has dropped by almost 25% from its all-time high, which it reached in February this year. This decline is mostly because investors have been disappointed by the company’s decision to acquire Auth0. 

The firm will spend $6.5 billion in cash and stock to acquire the relatively new company that offers identity access solutions. Many investors believe that Okta overpaid for Auth0, a company that had raised more than $332 million from venture capital firms. 

Also, there are concerns about Okta’s balance sheet in financing that deal. The firm ended the quarter with more than $2.5 billion in cash and more than $800 million in debt.

However, in the past, many SAAS companies have managed to experience robust growth through acquisitions. The most notable one is Salesforce (CRM), which has spent billions of dollars acquiring companies like Mulesoft and Tableau. Also, Microsoft has spent billions acquiring firms like LinkedIn and Github, while Adobe has acquired firms like Marketo.

Okta stock price analysis

Okta share price has jumped over the years. It has risen by more than 800% after its initial public offering in 2018. This rally was mostly because of the overall interest in fast-growing SAAS and cloud companies. As a result, its market capitalization has surged to more than $29 billion, making it bigger than VeriSign (VRSN), MongoDB), and Akamai Technologies. 

At the same time, it has become one of the most downgraded companies on Wall Street. As shown below, analysts from Piper Sandler, Baird, Mizuho, and Deutsche Bank have all downgraded the stock because of the Auth0 deal. 

Okta shares analysts forecasts

Okta shares analysts forecasts

Okta technical forecast

The daily chart shows that the Okta stock price has formed an island reversal pattern after the firm announced the Auth0 deal. The price is also below the ascending trendline that connects important levels since June last year. Most importantly, it has dropped below the 50-day exponential moving average (EMA) and is now at the 200-day EMA. Therefore, the near-term outlook for the stock is still bearish, and it could retest the March low at $200. However, in the long-term, the company’s growth could help sustain the upward momentum.

Okta technical forecast