Chicago, IL – February 14, 2025 – Zacks Equity Research shares Okta OKTA as the Bull of the Day and Dell Technologies DELL as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Cisco Systems Inc. CSCO, Microsoft Corp.’s MSFT and NVIDIA Corp. NVDA.
Here is a synopsis of all five stocks:
I last wrote about Okta as the Bull of the Day in December after their earnings report saw the stock shoot above $90 for the first time since the August gap down.
As shares slipped back down towards $80 on needless confusion about their outlook, I thought it was another prime opportunity to add. If you followed my lead, you're sitting with potential gains of 15-20% or more.
And now OKTA, a $17 billion provider of leading identity security solutions, is back to the upper realms of the Zacks Rank after EPS estimates turned north again.
OKTA reports their Q4 FY25 (ended January) on March 3 and analysts have bumped their EPS growth consensus to 73%, from 69% previously. More importantly, they are edging up estimates for this fiscal year (began February).
This is important as OKTA is still recovering from a security breach that dampened business for several quarters.
But if anyone can recover from that incident, I think it's OKTA who lives and breathes this stuff in the age of AI and machine learning hacks that are making passwords obsolete and demanding new identity security tools.
Here's what I wrote in Q4 about OKTA...
Besides that fact that the company specializes in "identity security," in essence making sure that the person authorized for an IT function is the one being authenticated and monitored, they are also aggressively pursuing the edges of new AI threat vectors.
Yesterday, they rolled out an expansion of an existing service, Auth0, to attract more corporate clients as the threat landscape evolves. Traditional identity threats, bolstered by AI advances, are enabling low-quality, high-intensity attacks to become more dangerous and helping new, personalized attacks to emerge.
With bots making up nearly 50% of all internet traffic, developers are challenged with securing their applications in this landscape. Multi-factor authentication (MFA), with possession-based or biometric factors, remains as one of the most effective defenses.
Conversely, AI can also power bot detection, with AI helping Okta block 79% of automated login attempts and recently reduce bot traffic by 90% over a 90 day period.
February has been eventful for OKTA with a new COO who investors seem to favor since he's been around a while. And this week, Keybanc raised their PT on shares from $115 to $125.
To find out what else is new at OKTA under the surface, I spent a couple hours going through the investor relations site, press releases, and their blog to discover three very interesting developments.
Two weeks ago, Okta announced a multi-year partnership with the McLaren Racing Formula 1 Team. The partners aim to identify new ways to secure and improve the digital experience for over 500 million premier racing fans, partners, and employees around the world.
In December, OKTA was recognized as a Leader in the 2024 Gartner Magic Quadrant for Access Management for the eighth consecutive year. Gartner defines access management (AM) as tools that include authentication and single sign-on (SSO) capabilities, and that establish, manage and enforce runtime access controls for modern standards-based and classic web applications and APIs. The report evaluated 10 vendors on 15 criteria and placed Okta in the Leaders Quadrant among Microsoft and IBM.
Finally, if you are going to serve a premier technology company who values security more than any, who are you going to choose? Apple of course. I'm in the market for a new iPhone myself (as I tend to use them 3-4 years) and I was surprised to learn there will be no more fingerprint ID to access my phone. They have gone full facial.
Okta’s integration with Apple strengthens security, elevates user experience, and eases administration, according to a recent report last week by Stephanie Toh, Senior Product Marketing Manager. While the full report gets a little technical, this was something I could grasp...
Apple enables enterprise Identity providers (IdPs) to be integrated with Apple Business Manager. Okta was proud to be one of the first Identity providers to implement this capability, as our integration with Apple Business Manager and Apple School Manager delivers the secure and seamless capabilities needed by both users and administrators.
If you are a big Apple user in your personal or business life with Macs and other tools, I highly recommend going to the linked report above as it also has a series of videos describing the integrations for Apple Business Manager.
Bottom line: OKTA getting tapped by Apple for extensive integrations in the aftermath of previous security issues is just the confidence boost they needed.
As an OKTA shareholder, I am looking forward to hearing what the full-year outlook brings on March 3 and see if we can get OKTA back above $100.
Dell Technologies is well-positioned for the second-half of this year, according to Morgan Stanley analysts.
But the company is expected to guide below analyst and investor expectations for fiscal year 2026 (begun in February) as the near term is predicted to be not just "choppy" but also "tricky," the MS analysts wrote in a note on Thursday.
Followers of Zacks already knew this when DELL slipped into the cellar of the Rank earlier this week. More importantly, the Zacks Rank was negative on the stock after their late November Q3 earnings miss and guidance when the stock gapped down 12% from $142 to $124.
After the company's Q3 report, all eyes are on the delivery of Q4 results expected 2/27.
Apparently, analysts expect a downward revision to earnings per share guidance for fiscal year 2026, plus year-over-year margin pressure in the Infrastructure Solutions Group for the period.
Additionally, with lots of AI buildout goodness "priced-in" to these stocks, some analysts are expecting limited near-term upside for AI growth due to the well-known transformation in datacenters especially.
Morgan Stanley said it expects Dell's management to guide fiscal year 2026 revenue between $101 billion and $103 billion and non-GAAP EPS of $8.30 to $8.70, which is below consensus and their expectations.
But the i-bank analysts remain optimistic, with an updated forecast of $104 billion in revenue and $9.45 in EPS as still realistic for fiscal year 2026.
Just the same, the Morgan Stanley team decided to cut its price target on Dell shares to $128 from $154 while keeping its Overweight rating.
Bottom line: After a nice pause and pullback near $110, it seems DELL offers some degree of relative value here. Even though their next report will be full of potential surprises and volatility, it looks like risk as been greatly reduced already, giving datacenter-savvy investors a chance to play the upside with favorable odds.
The global IP-based networking giant, Cisco Systems Inc., reported solid second-quarter fiscal 2025 earnings results surpassing the consensus estimates on several counts. Consequently, on Feb 12, the stock price was up 6.6% in the after-market trading session.
Cisco came up with quarterly adjusted earnings of $0.94 per share, beating the Zacks Consensus Estimate of $0.91 per share. This compares to earnings of $0.87 per share a year ago.
CSCO posted quarterly revenues of $13.99 billion, surpassing the Zacks Consensus Estimate by 0.91%. This compares to year-ago revenues of $12.79 billion. The company recorded revenue growth after four successive quarters of decline.
Cisco continued to suffer from networking sales, primarily due to lackluster demand from telecommunication and cable services providers, as well as stiff competition. However, in the last reported quarter, revenues from networking products exceeds the consensus estimate.
On the other hand, revenues from observability, services, security and collaboration increased year over year, beating the respective consensus estimates. Similarly, non-GAAP margin for both product and service outpaced the consensus estimates.
The acquisition of Splunk in March 2024 was accretive to adjusted earnings per share sooner than expected. Splunk enhances CSCO’s recurring revenue base. Cisco rolled out Splunk on Microsoft Corp.’s Azure.
Moreover, the launch of artificial intelligence (AI)-powered Hypershield, which combines security and networking, strengthened Cisco’s security portfolio. Management said in a conference call that AI infrastructure orders with webscalers surpassed $350 million in the second quarter. Total AI infrastructure orders reached around $700 million. Management is expecting order size to exceed $1 billion in fiscal 2025.
Cisco specifically stated its three prone strategies to expand its AI opportunity. First, AI training infrastructure for webscale customers. Second, AI inference and enterprise clouds including Nexus switches, NVIDIA Corp.-based AI servers, AI PODs, and Hyperfabric and AI Defense software. Third, AI network connectivity.
Cisco raised its projection for fiscal 2025 (ending July 2025) EPS in the range of $3.68-$3.74 from $3.60-$3.66 estimated in November. The mid-point of the current EPS range of $3.71 is well above the current Zacks Consensus Estimate of $3.65.
The projection for fiscal 2025 revenues was raised to $56-56.5 billion from $55.3-56.3 billion forecast in November. The mid-point of the current revenue range of $56.25 billion is well above the current Zacks Consensus Estimate of $55.93 billion.
The current Zacks Consensus Estimate for fiscal 2025 earnings has improved 0.3% in the last 60 days. At present, the Zacks Consensus Estimate indicates a year-over-year increase of 3.9% and 6.9%, respectively, for revenues and EPS in fiscal 2026. The Zacks Consensus Estimate for fiscal 2026 earnings has improved 0.3% in the last 30 days.
We believe that analysts estimates for fiscal 2025 and 2026 EPS and revenues will increase in coming days after the release of excellent second-quarter financial numbers.
In the past year, Cisco provided a 25.9% return, marginally exceeding the S&P 500’s return of 23.4%. The stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. A favorable Zacks Rank and an earnings beat are likely to set the trajectory of CSCO’s stock northward.
Cisco currently carries the forward P/E of 17.09X for the current financial year, compared with 17.32X of the industry and 18.62X of the S&P 500. CSCO has a return on equity of 25.7% compared with -5.53% of the industry and 16.84% of the S&P 500 Index.
The short-term average price target of brokerage firms for the stock represents an increase of 3.6% from the last closing price of $62.53. The brokerage target price is currently in the range of $78-$56. This indicates a maximum upside of 24.7% and a maximum downside of 10.4%.
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