RBC Capital Markets has adjusted its price target for Okta, Inc (NASDAQ: NASDAQ:OKTA), a leading identity management company, reducing it to $101.00 from the previous $125.00 while keeping an Outperform rating on the stock.
The revision follows insights from the recent Oktane 2024 conference, which included discussions with Okta's customers, partners, and employees, as well as a Q&A session with the company's management.
During the event, the conversation centered on Okta's expansion strategies through new product offerings, growth initiatives, and challenges related to the number of user seats. Management indicated that they expect the current headwinds concerning seat count to continue into the first half of the next fiscal year but anticipate a normalization in the second half of FY/26.
Despite the reduction in the price target, RBC Capital Markets finds the valuation of Okta's shares to remain appealing. The shares are currently trading at multiples of 4.6 times and 19 times the estimated enterprise value to sales (EV/S) and enterprise value to free cash flow (EV/FCF) for the calendar year 2025, respectively.
The adjustment in the price target is attributed to a change in the multiple from 6.0 times CY/25E EV/S to 7.6 times, previously noted by the firm.
In other recent news, Okta Inc . reported a 16% year-over-year revenue increase to $646 million, primarily due to a 17% rise in subscription revenue. However, Okta's third-quarter calculated remaining performance obligations (cRPO) guidance fell short of projections, leading to several financial adjustments. Following these developments, Mizuho Securities cut Okta's price target to $92, maintaining a Neutral rating.
Truist Securities also revised Okta's price target to $80, while JPMorgan held steady with a $105 price target. Jefferies maintained a Hold rating with a consistent price target of $85, and DA Davidson lowered its price target for Okta from $85 to $75. BTIG reduced its price target to $98 from $128, and TD Cowen maintained a $110 price target. These adjustments followed Okta's recent event, Oktane 2024, where the company unveiled new product innovations and discussed its growth strategy.
InvestingPro Insights
To complement RBC Capital Markets' analysis, InvestingPro data provides additional context for Okta's financial position. Despite the reduced price target, Okta maintains a strong market presence with a market capitalization of $12.86 billion. The company's revenue growth remains robust at 18.74% over the last twelve months, with an impressive gross profit margin of 75.82%.
InvestingPro Tips highlight Okta's financial resilience, noting that the company "holds more cash than debt on its balance sheet" and "liquid assets exceed short-term obligations." These factors support RBC's view on Okta's long-term potential, even as it faces near-term headwinds.
Interestingly, while Okta is "not profitable over the last twelve months," InvestingPro Tips indicate that "analysts predict the company will be profitable this year." This aligns with RBC's expectation of normalization in the latter half of FY/26.
For investors seeking a deeper understanding of Okta's financial health and growth prospects, InvestingPro offers 7 additional tips, providing a comprehensive view of the company's position in the competitive identity management market.
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