On Wednesday, Canaccord Genuity maintained its Hold rating on Okta, Inc (NASDAQ:OKTA) but increased the price target to $94 from the previous $82. The company, currently valued at $13.88 billion, has demonstrated solid revenue growth of 18.74% over the last twelve months. The financial firm anticipates that Okta will undergo a transitional period in the upcoming quarters, which is expected to unfold over time and demonstrate whether operational challenges can consistently meet the rule of 40 metrics—a standard in the software industry that combines growth rate and profit margin.
The analyst from Canaccord Genuity believes that Okta will benefit in the long run from the growing adoption of Zero Trust security frameworks, considering the company's position as a leading innovator and consolidator in the expansive $80 billion Total (EPA:TTEF) Addressable Market (TAM) for Identity Security.
According to InvestingPro analysis, Okta maintains impressive gross profit margins of 75.82% and holds more cash than debt on its balance sheet, supporting its growth potential. Despite this potential, the firm has decided to remain on the sidelines with its Hold rating, suggesting a cautious approach to the stock at this time.
Canaccord Genuity's revised price target of $94 is based on approximately 5.5 times the enterprise value to sales ratio of their calendar year 2025 estimates. This adjustment reflects a more optimistic valuation of Okta's stock, indicating a belief in the company's future revenue growth potential. InvestingPro analysis suggests Okta is currently undervalued, with additional insights available in the comprehensive Pro Research Report, which provides deep-dive analysis of this and 1,400+ other US stocks.
Okta, a prominent player in the identity and access management sector, is seen as well-positioned to capitalize on the shift towards more secure authentication methods. The company's focus on identity security is increasingly relevant in a digital landscape where data breaches and cyber threats are on the rise.
Investors and market watchers will likely monitor Okta's performance in the forthcoming quarters to see if the company can overcome operational challenges and capitalize on its strategic market position. The raised price target from Canaccord Genuity serves as a revised expectation of the company's market performance based on the anticipated sales growth.
In other recent news, Okta, Inc. reported a 14% increase in revenue and a 13% rise in calculated remaining performance obligations (cRPO) growth in the third quarter of fiscal year 2025. The company's revenue growth was notably driven by robust demand from large enterprises, particularly in the U.S. Federal sector. Okta's guidance for the fourth quarter exceeded consensus expectations, indicating continued revenue growth. However, the company's preliminary revenue growth guidance for fiscal year 2026 is set at just 7% year-over-year.
Following the earnings release, multiple firms updated their assessment of Okta. Mizuho (NYSE:MFG) raised its price target to $100, maintaining a neutral stance. TD Cowen held steady with a price target of $110, while BTIG analyst Gray Powell increased the price target to $110. Goldman Sachs also maintained its Buy rating with a steady price target of $107.00. DA Davidson, meanwhile, raised Okta's price target to $90.00 while maintaining a Neutral rating.
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