On Thursday, Piper Sandler adjusted its outlook on Okta, Inc. (NASDAQ:OKTA), a leading identity management company, by lowering the price target to $100 from the previous $110 while maintaining a neutral rating on the stock.
The revision follows Okta's second-quarter performance, which indicated some positive results against a conservative guidance, yet the forecast for single-digit percentage growth in current remaining performance obligations (cRPO) during the third quarter has raised concerns among investors.
The company's management has been exercising caution in their guidance, citing ongoing macroeconomic pressures and potential repercussions from last October's security incident.
Despite these concerns, the company reported no measurable impact from the security incident on its second-quarter performance. The lack of visible signs of business reacceleration prompted the firm to retain its neutral stance on Okta's shares.
Piper Sandler's analyst noted that while Okta's second-quarter execution revealed some advantages over conservative expectations, the guidance for the third quarter has not been as optimistic. The forecasted growth in cRPO, which is a key indicator of future revenue, is expected to be in the single digits, a factor likely to cause unease among investors who may be anticipating stronger indicators of growth.
The analyst also pointed out that Okta's management is factoring in a degree of prudence in their outlook due to the macroeconomic environment and potential impacts from the security incident that occurred in the previous year. This cautious approach comes despite the absence of any quantifiable effect on the second quarter's results from the incident.
In summary, the firm's decision to lower the price target reflects a cautious approach towards Okta's stock, acknowledging the company's stable performance in the second quarter but also recognizing the challenges it faces in accelerating growth. The neutral rating suggests that while there may be potential for Okta's stock, the current outlook does not warrant a more optimistic investment rating.
In other recent news, Okta Inc . reported a 16% year-over-year revenue increase to $646 million, driven by a 17% rise in subscription revenue. Despite these strong results, Okta's third-quarter calculated remaining performance obligations (cRPO) guidance fell short of projections. BMO Capital Markets adjusted its outlook on Okta, raising its price target on the stock to $103.00, up from the previous $100.00, while maintaining a Market Perform rating. Canaccord Genuity, however, reduced the stock's price target to $90, citing concerns about decelerating cRPO growth.
Meanwhile, Truist Securities reduced the price target to $95, expressing concerns over Okta's growth in new business, particularly in the small and medium-sized business sector. Baird maintained an Outperform rating on Okta, while reducing the price target to $105.00. Scotiabank lowered the price target for Okta to $92.00, citing concerns about the company's growth.
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