On Wednesday, Evercore ISI maintained a positive stance on Okta, Inc (NASDAQ:OKTA), reiterating an Outperform rating and a $122.00 price target. The firm acknowledged Okta's strong third-quarter results, which surpassed expectations, with impressive revenue growth of 18.74% year-over-year. According to InvestingPro analysis, the company appears undervalued at current levels, with analyst targets ranging from $75 to $140.
Okta's fourth-quarter guidance was deemed satisfactory, and management has committed to operational margins of 22% and free cash flow margins of 24%. InvestingPro data reveals the company maintains impressive gross profit margins of 75.82% and holds more cash than debt on its balance sheet. Evercore ISI anticipates that Okta's growth could approximate 12% with improving margins, factoring in the company's historical revenue beat pattern and the absence of impacts from the October security breach.
The company's current quarter revenue growth is projected to be around 10.4% at the midpoint, potentially reaching closer to 13% based on past performance. However, the calculated remaining performance obligations (CRPO) bookings indicated a slight miss, which could provide detractors with some concerns, though an estimated 11% bookings growth is just above consensus.
Mixed metrics were observed, with a quarter-over-quarter dip in the net retention rate from 110% to 108%, and a softening in new customer additions due to macroeconomic factors. Nevertheless, management highlighted positive developments in governance and privileged access management (PAM), as well as significant momentum in the federal business sector during the third quarter. InvestingPro subscribers have access to over 30 additional key metrics and insights about Okta, including detailed financial health scores and comprehensive Pro Research Reports.
Evercore ISI commented that while progress on margins and free cash flow helps balance some top-line pressures, it may not be sufficient to excite investors until there is clearer visibility into the acceleration narrative that management has been promoting. Despite these challenges, Okta's valuation remains attractive, with a market capitalization of $13.88 billion and strong liquidity metrics showing current assets exceeding short-term obligations. As a leading identity asset, it continues to be a top investment priority heading into calendar year 2025.
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