Asia stocks edge higher as tech meanders on Nvidia; Hong Kong hit by soft earnings
Tuesday saw Evercore ISI initiating coverage on Okta, Inc (NASDAQ:OKTA) with an Outperform rating and a price target of $122.00, representing a significant upside from the current trading price of $87.16. According to InvestingPro data, Okta maintains strong financial health with an overall "GOOD" rating, supported by impressive gross profit margins of 76.32%. The firm recognized Okta’s robust fourth-quarter performance, which surpassed expectations and signaled that previous execution challenges might be resolved, marking a potential turning point for the company.
The positive results were attributed to several factors, including enhanced partner contributions, increased cross-selling of Identity Governance and Administration (IGA) solutions, which now boast over 1,300 customers and more than $100 million in Annual Contract Value (ACV), and Privileged Access Management (PAM) gains. This success has contributed to Okta’s robust revenue growth of 15.33% over the last twelve months, as reported by InvestingPro. Additionally, new products now represent 20% of bookings, a noticeable increase from 15% in the previous quarter. Auth0, a product suite, also reported its best bookings quarter to date.
Sales productivity improvements were noted, thanks to a higher number of experienced sales representatives and increased traction in the upmarket segment, leading to record-long contract terms. While the Net Revenue Retention (NRR) rate showed a slight decrease to 107% from the previous quarter’s 108%, it is expected to stabilize around this level, with a potential rebound in the second half of the year as COVID-related downsells decrease.
The guidance for the first quarter was strong, and the updated FY26 guidance increased from 7% to 9.4%, adding approximately $77 million, which was beyond expectations. Management has committed to achieving 25% operating margins and 26% free cash flow margins. The first-quarter guidance suggests a performance that could be closer to 12%, assuming it follows the trend of surpassing expectations by about 2%, as seen in the first quarter of FY25.
Despite a miss in the Current Remaining Performance Obligations (CRPO) bookings, which grew by approximately 0.8% year-over-year compared to the consensus expectation of a 9.1% increase, the company’s outlook remains optimistic. This miss is partly due to the seasonal nature of Okta’s business, with the fourth quarter typically being the strongest for bookings and the first quarter the weakest.
In summary, despite previous performance issues, Evercore ISI views Okta’s risk/reward profile as highly compelling, especially considering the company’s position as a leading identity management asset and a top investment priority in the current year. With a market capitalization of $14.94 billion and analysis suggesting the stock is currently undervalued, Okta presents an interesting opportunity for investors. For deeper insights into Okta’s valuation and growth prospects, including access to comprehensive financial metrics and expert analysis, check out the full research report available on InvestingPro.
In other recent news, Okta, Inc. has reported impressive fiscal fourth-quarter results, exceeding expectations across several financial metrics. The company’s calculated remaining performance obligations (CRPO) saw a 15% year-over-year increase, surpassing both internal and external forecasts. This positive outcome has led several analyst firms to adjust their ratings and price targets for Okta. Mizuho (NYSE:MFG) Securities upgraded Okta to Outperform and raised its price target to $127, citing the company’s robust growth and strategic positioning in the identity management sector. Similarly, DA Davidson upgraded Okta to Buy, setting a new price target of $125, highlighting sustained double-digit growth and increased sales productivity. BTIG also revised its price target to $123, acknowledging Okta’s strong performance and potential for continued growth. Barclays (LON:BARC) increased its price target to $115, noting the company’s improved subscription coverage and potential revenue upside in fiscal year 2026. Truist Securities raised its price target to $100, maintaining a Hold rating while recognizing Okta’s strong platform performance and enterprise customer engagement. These developments indicate a broadly positive outlook from analysts regarding Okta’s future performance.
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