Okta Inc. (NASDAQ:OKTA) spiked from $152.50 to $174.50 in a week when the key determinant of prices was market hype created by technology stocks. The spike in price is against the conspicuous bearish trend that the stock has faced since November 2021.
The rise is not due to any significant news or fundamental strength enhancement, which creates the need to assess the stock further.
Okta is a fast-growing security and access management company. The company has a fast-growing customer base that mainly includes corporate bodies. Most importantly, the company has a high customer retention rate. This means that the current clients are likely to renew their subscriptions to the company’s security and access management solutions.
In the recent past, the company garnered a large number of clients as business shifted online due to COVID-19. The company expects the strong growth in subscriptions to continue, even as workers return to working from offices. There is no doubt that the company will grow.
However, it is worth recognizing Okta as a narrow moat company and factoring that into its valuation.
Okta is definitively bearish
Source – TradingView
Technical analysis of the share price confirms that this week’s rally was just but a false alarm on the market valuation of the stock. The stock is expected to edge lower in line with the definitive bearish pattern that it faces.
Both MA 10 and MA 20 are below MA 50, and the RSI has been trending downwards. There is absolutely no reason to believe that the stock is yet out of the red zone.
Okta is a narrow moat technology stock invested in secure identification and access management. While the company is recording growth in numbers of customers, it could be considered overvalued at the current prices. We recommend selling the stock.
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