There's a cybersecurity stock on Josh Brown's list that's pulling back. How he's trading it
(This is The Best Stocks in the Market , brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh — Last night, security play Fortinet (FTNT) disappointed the Street, and its peer group of stocks is paying for it. All of these names are selling off in sympathy, including the company we are spotlighting today, Okta, Inc (OKTA) . We’re going to watch the pullback to see how long it takes for OKTA bulls to come into the stock. There’s a key level that has to hold which we’ll get into in a moment. Palo Alto Networks (PANW) paid $25 billion for CyberArk, one of the biggest security deals ever that closed on Feb. 11. Every big security vendor spent 2026 buying its way into identity, and the receipts are public. Cisco (CSCO) paid $400 million for Astrix Security to add agent security onto its networking and security stack. SailPoint (SAIL) paid $123 million in cash for Entro Security. ServiceNow (NOW) agreed to pay more than $1 billion for Veza. Cyera reportedly paid about $1 billion for Oasis Security. Okta even went shopping itself, paying just under $200 million for Permiso Security. Here’s why they’re all lining up. Your employees log in from kitchens and coffee shops. There’s no office network left to defend. The login is the perimeter. Then the agents showed up. Okta’s president says a Fortune 50 healthcare customer told them it had 50 agents deployed. A few weeks later it was 1,500. Every one of them needs an identity somebody can track and shut off. Okta is the incumbent giant of the identity space. It has more than 20,000 customers — including two thirds of the Fortune 100. But while they dominate identity, they’re a minnow in the stock market compared to Palo Alto and CrowdStrike (CRWD) . It’s in the First Trust Nasdaq Cybersecurity ETF (CIBR) and the Amplify Cybersecurity ETF (HACK) , but in much smaller size than the names you’ve already heard of. People have been buzzing about this name as a potential acquisition target for as long as it’s been a public company, but that doesn’t necessarily mean something will happen. However, if you look at who already bought their way into identity this year — Palo Alto, Cisco, ServiceNow and SailPoint are off the board — who’s still shopping? Who could pay a premium on an enterprise value of around $40 billion for this company? There are some names out there. I’m not predicting anything, I’m just saying I wouldn’t be shocked if we wake up someday to hear about it. Sean’s got the story behind Okta below. I’ll be back with the chart and where we’d be wrong. Best Stock Spotlight: Okta, Inc. (OKTA) Sean — Cybersecurity stocks sold off after the bell last night when Fortinet disappointed by not beating expectations soundly enough. Dragging our spotlight, OKTA, lower with the group. Palo Alto, CrowdStrike and Zscaler were each down about 6%. Okta is an independent identity provider, and its software decides who, or what, gets into a company’s applications and data. Workforce identity is 59% of annual contract value and growing 11% year over year, while customer identity is 41% and growing 13%. The takeover chatter has been relentless, as Josh noted. Reports of a possible deal surfaced recently in July 2025, right as Palo Alto was reported to be eyeing CyberArk. That deal got done at $25 billion, while Okta’s rumor went nowhere and the stock has gone from about $100 to $222 since. The fundamentals are decent. The last quarter was a clean beat, with revenue of $805 million (up 11%) against about $795 million expected and adjusted EPS of $1.05 against $0.97. Current RPO (remaining performance obligations – the total amount of contracted future revenue that has not yet been recognized) grew 14%, about 2 points faster than the prior quarter, and free cash flow was $227 million, a 28% margin. Management raised full-year guidance to $3.22 billion to $3.23 billion of revenue and $3.90 to $3.94 of non-GAAP EPS, against $3.84 expected. On AI, CEO Todd McKinnon said Okta for AI Agents is “too small to show up in the numbers right now,” as new products were about 30% of bookings, led by Identity Governance. However, with the explosion of agent use across the world, this number should go higher. At $222 a share, Okta trades at about 57x the midpoint of its FY27 non-GAAP EPS guide, with revenue growing 10-11%. On Josh’s $40 billion enterprise value, that’s about 43x the midpoint of its $910 million to $930 million free cash flow guide. Okta reports Q3 earnings on Dec. 1, guiding to $813 million to $817 million of revenue and $0.92 to $0.94 of EPS. It will be the first print since the stock moved from $163 to $222. Earnings reactions across tech have been mixed this week, and beats alone haven’t been enough. Microsoft rose about 4% after hours on a beat and 48% Azure growth, but Alphabet fell about 7% despite a surge in Google Cloud revenue. Meta dropped almost 8% last Thursday after beating revenue estimates, and Fortinet fell sharply last night on a beat, as we noted. Okta is up about 36% since its last report, so the bar going into December is high. Risk management Josh — If this stock breaks $235, it’s going much higher, possibly retaking the levels of five years ago close to $300. As I mentioned above, it’s in the midst of a pullback now so we’ll want to see if the key trend line holds before going long. But let’s look at the stock over the last year and catch up with where it’s been… Okta spent the first half of the year stuck below $100, then gapped out of that base on May 2, opening near $108 on heavy volume. A second gap followed on June 1. Neither has come close to filling, which is what breakaway gaps do, and the stock has doubled since. It’s at $222 now, with the 50-day rising at $190. With RSI at 59, momentum has come all the way back from a flush into the 40s on Oct. 16. At 59 the stock has room to take another shot at the high without starting from a stretched reading. If I’m getting long here, I’m using $190 as an obvious stop. That’s the rising 50-day, which the stock undercut on Oct. 20 and took right back the next day. The Oct. 16 and 20 lows at $185 and $184 sit just underneath. Traders can act on a daily close below $190. That’s the cheapest way to learn whether this trade works. Investors can wait for a weekly close below it. Under $190 on a closing basis and the uptrend that started at the May gap is in question. We don’t want to stick around to find out the answer in that case, so a breach of this level takes us out of the trade. 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