On Thursday, BMO Capital Markets adjusted its outlook on Okta, Inc. (NASDAQ:OKTA), a leading identity management company. The firm raised its price target on the stock to $103.00, up from the previous $100.00, while maintaining a Market Perform rating.
The revision follows Okta's report of sustained robust growth in Remaining Performance Obligations (RPO), mirroring the performance of the last quarter, particularly in enterprise deal executions.
The analyst from BMO Capital Markets highlighted Okta's consistent delivery of healthy RPO growth and strong execution on enterprise deals. Despite the ongoing uncertainty around upsells and seat growth, the firm sees potential for Okta to exceed its top-line forecasts for the second half of fiscal year 2025, citing a conservative guidance provided by the company.
The maintained Market Perform rating reflects BMO Capital's caution regarding Okta's long-term product expansion strategy. The firm pointed out concerns about Okta's ability to navigate the competitive landscape, the uncertain macroeconomic environment, and the execution of its broader product strategy.
The analyst concluded with a moderate increase in the target price, up to $103 from $100, based on the company's potential to outperform its top-line guidance in the latter half of fiscal year 2025.
In other recent news, Okta, Inc. reported its second quarter results, revealing a 16% year-over-year revenue increase to $646 million. This growth was driven by a 17% rise in subscription revenue and a 13% year-on-year rise in calculated remaining performance obligations (cRPO), which exceeded expectations at $1,995 million. However, the company's third-quarter cRPO guidance fell short of projections, signaling potential deceleration in growth.
In response to these recent developments, several firms adjusted their outlook on Okta. Canaccord Genuity maintained a Hold rating but reduced the stock's price target to $90, citing concerns about decelerating cRPO growth.
Similarly, Truist Securities, Baird, and Scotiabank also reduced their price targets to $95, $105, and $92 respectively, while TD Cowen maintained a steady price target of $110.
Evercore ISI initiated coverage on Okta with an Outperform rating and a price target of $122, acknowledging the company's strong performance amidst potential macroeconomic pressures. Okta's management also highlighted several challenges impacting their guidance, including macroeconomic factors and difficulties in expanding customer seats.
InvestingPro Insights
In light of BMO Capital Markets' updated outlook on Okta, Inc., recent data from InvestingPro provides additional context to the company's financial position and market performance. Okta holds more cash than debt on its balance sheet, which could provide a buffer against market uncertainties and enable continued investment in product development and market expansion. Moreover, analysts predict that Okta will become profitable this year, a significant milestone that may reassure investors about the company's growth trajectory.
InvestingPro data shows that Okta's market capitalization stands at $16.24 billion, with a high revenue growth of 20.45% over the last twelve months as of Q1 2025. This aligns with the robust RPO growth noted by BMO Capital Markets. Despite not being profitable over the last twelve months, Okta's gross profit margin remains strong at 75.15%, indicating that the company maintains a solid grip on its operational costs relative to its revenue.
For investors seeking additional insights, there are over six additional InvestingPro Tips available, which delve deeper into Okta's financial health and market potential. These tips include an analysis of Okta's liquid assets, which currently exceed its short-term obligations, and a look into the company's historical return over the last decade. To explore these insights further, visit the InvestingPro platform for Okta at https://www.investing.com/pro/OKTA.
The information provided by InvestingPro complements the cautious yet optimistic view from BMO Capital Markets, offering investors a more comprehensive understanding of Okta's financial standing and potential for growth in the competitive identity management market.
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