TipRanks Smart Growth Portfolio #19: Token of Return
Dear Investors,
Welcome to the 19th edition of the Smart Growth Portfolio and Newsletter.
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Portfolio News
❖ Deutsche Bank has initiated coverage of Micron (MU) with a “Buy” rating and $150 price target, implying about 22% upside from current levels. Deutsche is positive on the company’s cyclical and secular setup, noting that high bandwidth memory (HBM) is an “underrated driver” of GenAI processor performance improvements, and its growth should drive DRAM revenue growth for Micron with profitability above historical levels. The bank also forecasts continued bit growth and selling price expansion in MU’s non-HBM DRAM business in the coming years.
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Under Review
❖ We are placing Cellebrite DI (CLBT) under review due to a widening rift between Wall Street appraisals and market sentiment.
Cellebrite DI provides digital intelligence solutions that assist law enforcement, enterprises, and government agencies in investigating and managing digital evidence. Leveraging advanced AI and forensic tools, the company enhances data accessibility and compliance while streamlining investigations.
Wall Street rates CLBT a “Strong Buy,” with an average price target implying nearly 50% upside from current levels. Seven of eight analysts covering the stock rate it a “Buy,” with Craig-Hallum and Needham reaffirming their rating as recently as July 9. Deutsche Bank also recently named Cellebrite a top industry pick for Q3.
Despite these optimistic views, Cellebrite’s stock continues to decline, down more than 30% year-to-date. Notably, CLBT’s trend has diverged from the recent broader recovery in small-cap growth stocks. Since May 13, Cellebrite is down ~25%, while leading small-cap growth ETFs are up ~5%.
Although news coverage of Cellebrite is limited, there appears to be no event warranting extreme negativity. On the contrary, the company recently appointed a new CFO – David Barter, a seasoned and successful executive with a track record of driving growth and improving profitability. Additionally, CLBT expanded its partnership with the National Center for Missing and Exploited Children (NCMEC), reinforcing its strong reputation in combating crime.
Given this growing disconnect between stock performance and the company’s standing with customers, partners, and analysts, we are not rushing to sell. Instead, we prefer to wait and see whether investor sentiment realigns with the fundamentals.
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❖ We are keeping Alkami Technology (ALKT) under review due to softening analyst sentiment and negative market perception of macro-exposed fintech stocks.
Over the past quarter, the average 12-month price target has declined – with Needham, Lake Street, and JPMorgan all lowering their targets in the past two months alone. While no rating downgrades have emerged, there have been no upgrades since March, and the tone from Wall Street has grown more cautious.
However, these comments aren’t company-specific – rather, they reflect near-term headwinds facing fintech firms tied to the economy’s health. That divergence is evident in the group’s performance over the past couple of months: while investing, asset management, and trading-related stocks outperformed, those focused on SMBs, merchants, payments, and community banks have generally lagged.
Alkami reported solid Q1 2025 results – with revenue up 28.5% YoY and continued improvement in adjusted EBITDA, gross margins, and narrowing GAAP net losses. However, the company slightly missed on non-GAAP EPS versus consensus and continues to struggle with cash flow consistency. Additionally, its exposure to regional banks and credit unions leaves it vulnerable to macroeconomic headwinds.
That said, we are not rushing to exit. Alkami’s position at the intersection of cloud banking, AI, and client personalization still offers strategic upside. The recent acquisition of MANTL strengthens its onboarding suite, and integration has proven much smoother than previously expected. In fact, Alkami – through MANTL – recently became the first fintech to integrate Plaid Layer for regional banks, enhancing its competitive stance against traditional providers and fintech challengers alike.
While we believe in Alkami’s long-term potential, we are mindful of the sell-off that could make it harder for the stock to regain momentum, even with sound fundamentals. We’ll continue monitoring ALKT’s news and stock performance until we see a catalyst that could shift our view – or until the company’s next earnings report on July 30. For now, Alkami remains in the Smart Growth Portfolio – but under active review.
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❖ We are keeping Clearwater Analytics (CWAN) under review as the stock navigates short-term volatility tied to its ambitious acquisition strategy.
While CWAN has declined roughly 18% year-to-date, we believe this weakness reflects investor anxiety around integration – not fundamental deterioration. In 2025, Clearwater announced a transformative wave of M&A, acquiring Enfusion, Beacon, and BISTRO to build a unified front-to-back investment operations platform. These deals are ambitious and will reshape the business, but they also introduce complexity: Clearwater must integrate disparate technologies, cultures, and clients. Additionally, the acquisitions were financed with stock and debt, leading to dilution and a more leveraged balance sheet – factors that weigh on near-term sentiment, particularly with elevated interest rates.
However, analysts remain optimistic, overwhelmingly assigning CWAN a “Buy” rating. There have been no downgrades in the past two months; on the contrary – Piper Sandler initiated coverage with a “Buy” in late June. Although Oppenheimer slightly lowered its Street-high price target, it now matches Morgan Stanley’s and implies an upside of 60% from current levels.
Meanwhile, CWAN’s business momentum remains reassuringly positive, tilting our sentiment toward continuing to hold the stock in the Portfolio. Two weeks ago, Clearwater announced that Versicherungskammer Group – Germany’s largest public insurer – selected its platform to modernize middle, back-office, and risk operations following a rigorous review. This high-profile win validates Clearwater’s strategy and demonstrates its ability to deliver an integrated, cloud-native solution leveraging its recent acquisitions.
Moreover, on July 9, Clearwater Analytics announced a strategic partnership with Bloomberg, incorporating CWAN’s accounting platform into Bloomberg’s enterprise investment solutions to create a comprehensive offering for asset owners and managers. This is a major milestone, strengthening Clearwater’s competitive position against larger full-stack providers and enhancing its value proposition as an open, interoperable platform prioritizing best-of-breed partnerships.
Through this collaboration with a world-leading investment data platform and massive institutional footprint, CWAN gains access to an expanded client base – potentially accelerating client acquisition and driving earnings growth well beyond its current trajectory.
While we remain mindful of potential integration shortfalls, we view Clearwater’s stock underperformance as temporary – though we choose to remain on guard for now.
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This Week’s Top Growth Pick: Okta (OKTA)
Okta, Inc. is an identity security company that secures the connections between people, devices, and applications in the digital world. Its platform delivers secure authentication, governance, and lifecycle management for users and non-human identities across cloud, mobile, and on-premise systems. Okta enables organizations to adopt zero-trust strategies, mitigate cyber risks, and provide seamless access for employees, partners, and customers. As identity becomes a critical control point in hybrid work, AI adoption, and cloud transformation, Okta empowers enterprises to secure trust at scale – turning identity into a driver of both security and productivity.
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Lock, Stock, and Access
Founded in 2009, Okta has grown into a leading identity security company – providing the authentication, governance, and lifecycle management capabilities that power modern digital infrastructure. From its early days as a cloud-first challenger to entrenched on-premise identity providers, Okta has steadily expanded its reach into enterprise and developer ecosystems, making identity a strategic layer of security and productivity.
Over the past five years, Okta has accelerated this evolution through significant innovation, targeted acquisitions, and deepened partnerships. The acquisition of Auth0 in 2021 was a defining moment – giving Okta a strong foothold with developers and expanding its customer identity and access management (CIAM) offerings. Auth0’s API-first platform complemented Okta’s enterprise strengths, creating a broader portfolio that now spans workforce, customer, and machine identities.
In parallel, Okta has invested heavily in next-generation identity products. Since FY2022, it has introduced capabilities such as Okta Identity Governance, Privileged Access Management, Identity Security Posture Management, and most recently Auth for GenAI, designed to secure AI agents and non-human identities. These innovations positioned Okta at the forefront of securing both human and machine-to-machine interactions – a critical and rapidly expanding area of enterprise security – unlocking a major new opportunity in identity protection.
Strategic collaborations have further strengthened its competitive position. Okta deepened alliances with hyperscalers to embed its identity solutions more seamlessly into cloud-native and hybrid environments. It also secured FedRAMP High and IL4 certifications, unlocking larger opportunities in the U.S. public sector – now a meaningful and growing part of its business.
Investments in security and resilience have been equally transformative. Following breaches in 2022-23, Okta overhauled its own security infrastructure, introduced the Okta Secure Identity Commitment, and launched robust threat intelligence capabilities – reinforcing customer confidence and establishing itself as an industry leader in identity security best practices.
This period of product expansion, organizational specialization, and stronger enterprise and developer engagement has allowed Okta to maintain its leadership while capturing new growth areas. With a growing role in AI security, expanded public sector traction, and partnerships with cloud and technology leaders, Okta is redefining what identity security means in the era of hybrid work, AI-driven automation, and cloud-scale operations – securing trust at the heart of the digital economy.
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Fabric of Trust
Okta’s business is built on delivering identity and access management solutions that secure connections between people, devices, applications, and increasingly, machine-to-machine systems. Its business is overwhelmingly subscription-based and SaaS, with recurring revenue accounting for 98% of total sales – a hallmark of its predictable, high-margin model.
Okta’s business revolves around two complementary streams: Workforce Identity and Customer Identity (CIAM). Workforce Identity – the larger of the two, at roughly 65-70% of revenue – helps organizations protect their employees and contractors. It provides the tools to manage internal access securely and efficiently, with features like single sign-on (SSO), multi-factor authentication (MFA), governance, privileged access, and lifecycle automation. These capabilities form the backbone of zero-trust strategies – ensuring that internal systems stay both secure and usable.
Customer Identity, or CIAM, contributes the remaining 30-35% of revenue and is growing at a faster clip. This side of the business focuses outward – on customers, partners, and even AI agents – enabling companies to deliver secure, frictionless login and access experiences to the people and systems that interact with their products. Much of CIAM’s momentum comes from Auth0, the developer-friendly platform extending the company’s reach into digital products and APIs.
Okta’s solutions are delivered through a fully cloud-native platform, integrated with over 8,000 applications and infrastructure services. Customers pay subscription fees based on the number of identities and product modules used, with many signing multi-year contracts. Both segments benefit from deep partnerships with cloud leaders – AWS, Microsoft Azure, Google Cloud, and Oracle Cloud Infrastructure – as well as integrations with leading SaaS and security vendors, reinforcing Okta’s value as a neutral identity fabric that works across ecosystems.
What sets Okta apart is breadth and ease of deployment. Unlike legacy on-prem solutions or single-cloud lock-in offerings, Okta provides a unified platform that spans workforce and CIAM, human and non-human identities, and hybrid/multi-cloud environments – all wrapped in a zero-trust framework. Its innovation cadence is a key edge – in recent years Okta has introduced Identity Governance, Privileged Access, Identity Security Posture Management, and AI-driven products like Auth for GenAI, helping customers manage the rise of non-human identities created by AI agents.
The company’s total addressable market (TAM) remains substantial and underpenetrated. Okta estimates its TAM at ~$80 billion and growing – fueled by cloud adoption, hybrid work, cybersecurity spending, and the explosion of machine identities. Within this market, Okta holds a mid-single-digit share, leaving significant runway to grow through share gains and market expansion.
Recent U.S. legislation – notably the One Big Beautiful Bill (OBBB) – further supports Okta’s growth by allowing immediate R&D expensing and extending 100% bonus depreciation, improving cash flows and supporting continued innovation.
By combining sticky SaaS economics, a defensible neutral platform, and leadership in securing both human and machine identities, Okta sits squarely at the center of a critical and expanding market – with meaningful headroom to capture more of the identity security opportunity.
Source: Okta, Inc. Q1 FY26 Investor Presentation
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Counting Credentials
Okta sailed past analyst consensus in FQ1 2026, reporting $688 million in revenue, up 12% year-over-year. Growth was driven by its durable subscription-based model and rising adoption of advanced offerings like Okta Identity Governance, Okta Privileged Access, and Identity Threat Protection with Okta AI. Workflow executions – automated processes like provisioning, approvals, and alerts – have grown nearly 400% over three years, underscoring how deeply customers are weaving Okta into operations.
The U.S. public sector delivered two of the quarter’s three largest deals – including deployments for a large federal agency and a defense customer – highlighting Okta’s growing credibility in highly regulated environments, supported by its FedRAMP High and IL4 certifications.
Customer momentum remained healthy, with the number of customers spending over $100K annually rising ~7% sequentially and overall customer count nearing 20,000. The largest deal of the quarter came through the Auth0 platform – reinforcing its ability to serve both workforce and customer identity needs. RPO rose 21% to $4.1 billion, while cRPO increased 14% to $2.2 billion.
Profitability continued to improve. GAAP net income reached $62 million – its second consecutive quarter in the black – with GAAP operating income at 6% of revenue, versus an 8% loss a year earlier. Non-GAAP operating margin expanded to 27%, with gross margin steady at 82% and subscription gross margin at 84%. Free cash flow was strong at $238 million, or a 35% margin – very high for a recently GAAP-profitable SaaS company. Okta ended the quarter with $2.73 billion in cash and no material debt , leaving it with substantial runway for growth.
Okta has beaten analyst consensus on non-GAAP EPS for 16 consecutive quarters, delivering $0.86 in FQ1 2026 – above the $0.77 forecast and up 32% YoY. Earlier explosive gains have settled into a more sustainable trajectory of steady, profitable growth – reflecting its stable SaaS model and margin expansion.
Looking ahead, Okta guided for FQ2 2026 revenue of $720-725M, reflecting growth of 10% YoY, and non-GAAP EPS of $0.87-0.89, above the Street’s consensus outlook of $0.84. Full-year guidance was reiterated at 9-10% revenue growth, 25% non-GAAP operating margin, and sustained GAAP profitability, signaling confidence while acknowledging elevated macroeconomic risks in the near term.
Amid those risks, opportunities are also emerging. Morgan Stanley now sees Okta as the biggest incremental beneficiary of the OBBB fiscal package, projecting a nearly 12% margin boost thanks to its high R&D spend – over 25% of annual revenue – and large deferred tax assets. Post-OBBB, MS expects Okta’s next-year FCF margin to reach ~39%, versus the current 27% consensus. They also view Okta, alongside several other software firms, as a shelter from tariffs and a beneficiary of a weaker dollar.
These positives build on a sticky SaaS base, rising share in the public sector and customer identity markets, and a clear path to profitability – showing that Okta can grow with discipline while cementing its role at the heart of enterprise security.
Source: Okta, Inc. Q1 FY26 Investor Presentation
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Identification Verified
Okta’s stock (ticker OKTA) has lagged its closest industry peers over the past year – weighed down by its smaller size and earlier-stage profitability, which signal higher risk. That risk was a headwind in a more cautious market, where high-risk, high-reward growth names fell out of favor amid trade tensions and macroeconomic uncertainty. However, the momentum appears to have shifted recently, with sentiment starting to favor growth stocks.
Okta’s muted stock gains have left it with one of the most attractive price-to-growth setups in the cybersecurity industry. The company is projected to post the third-best EBITDA growth in its peer group (after CyberArk and Zscaler) over the next year, while its forward EPS growth ranks second only to CyberArk. At the same time, its current profitability metrics – such as EBITDA and net income margins, as well as ROE – are second only to Palo Alto Networks, a large, established industry leader.
These strengths are complemented by Okta’s attractive valuations. Its Non-GAAP P/E and EV/Sales – both forward and trailing – sit notably below peer averages. The company’s TTM Price/Sales and Price/Cash Flow, as well as forward EV/EBITDA, also rank near the bottom of the group. Moreover, Okta’s Non-GAAP FWD PEG ratio of 1.58 is the lowest among its peers, suggesting the stock is priced reasonably relative to its expected profit growth – especially compared to larger competitors trading at higher PEGs despite slower growth.
Okta’s subdued stock performance in recent months has also left it with the largest upside potential versus the broader cybersecurity universe. Wall Street’s top analysts overwhelmingly rate the stock a “Buy,” with an average price target implying an upside of about 33% over the next 12 months.
With fundamentals improving, execution steady, and valuation still reasonable, Okta stands out as one of the more balanced names in the cybersecurity space as sentiment toward growth begins to recover.
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To Sum It All Up
Okta is an identity security leader providing cloud-based authentication, governance, and lifecycle management for human and machine identities. Its neutral, SaaS-delivered platform secures workforce and customer access across hybrid, multi-cloud environments, enabling zero-trust strategies and seamless user experiences. Okta’s role at the center of digital trust is expanding as hybrid work, AI agents, and public sector demand increase the need for secure identity solutions. Strong public sector traction, deeper cloud partnerships, and steady adoption of advanced products support its competitive position. For growth investors seeking exposure to the rising importance of identity in enterprise security, Okta offers a balanced opportunity – combining improving fundamentals, disciplined execution, and significant runway in an underpenetrated, fast-growing market.
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Smart Growth Portfolio
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Disclaimer
The information contained in this article represents the views and opinions of the writer only, and not the views or opinions of TipRanks or its affiliates and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy, or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices, or performance.
