Why Okta Stock Barreled Higher Tuesday Morning

Shares of Okta (NASDAQ: OKTA) charged out of the gate Tuesday, gaining as much as 8.9%. As of 2:13 p.m. ET, the stock was still up 8.2%.

The catalyst that sent the cybersecurity specialist higher was word that its stock would be added to a premier index early next month.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Joining the big leagues

In a press release that dropped after the market close yesterday, S&P Global announced that Okta would be added to the S&P MidCap 400 index prior to the start of trading on Thursday, May 1. The stock will be replacing Berry Global Group.

Late last year, S&P 500 member company Amcor announced its intention to acquire Berry in a deal valued at $13 billion. The combination got the blessing of regulators and approval from shareholders in March, and the deal is expected to close by mid-2025. The merger will effectively remove Berry from the index, so S&P Global was being proactive.

While it won't have any impact on Okta's financial or operating results, it's generally a positive development when a stock is added to an index. The move increases demand for the shares from index funds, as well as from institutional and passive investors, as they purchase the stock to match the composition of the index in question. This, in turn, puts upward pressure on the stock price -- at least in the short term.

Under the microscope

Okta has been in the midst of a turnaround, and the company's fiscal 2025 fourth-quarter results were promising. Revenue of $682 million climbed 13% year over year, while its adjusted earnings per share (EPS) of $0.78 jumped 24%. The company easily surpassed analysts' consensus estimates on both counts.

Perhaps more promising was management's guidance for 2026 revenue of roughly $2.855 billion and adjusted EPS of $3.17, both at the midpoint of Okta's guidance. Both were ahead of Wall Street's expectations.

After a high-profile security breach derailed the company's progress, Okta appears to be back on track, giving shareholders a boost of confidence in the process.

Should you invest $1,000 in Okta right now?

Before you buy stock in Okta, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Okta wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $598,818!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $666,416!*

Now, it’s worth noting Stock Advisor’s total average return is 872% — a market-crushing outperformance compared to 160% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of April 28, 2025

Danny Vena has positions in Okta. The Motley Fool has positions in and recommends Amcor Plc, Okta, and S&P Global. The Motley Fool has a disclosure policy.