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DA Davidson has adjusted its outlook on Okta, Inc (NASDAQ: NASDAQ:OKTA), reducing the price target to $85 from the previous $100, while keeping a Neutral rating on the stock.
The adjustment follows Okta's second fiscal quarter performance, which exceeded the company's conservative projections.
Okta reported a year-over-year increase in Current Remaining Performance Obligations (CRPO) growth of 13%, surpassing the guided range of 10-11%. However, the company has forecasted a lower CRPO growth rate of 9% for the upcoming quarter, which is below the consensus estimate of 10%.
The company did see a slight improvement in the addition of new logos compared to the first fiscal quarter, but the number of new customers was still down 43% compared to the same period last year.
The Dollar-Based Net Retention Rate (DBNRR) has declined to 110% and is anticipated to decrease further in the second half of the year. Management has acknowledged that sales productivity has not yet reached optimal levels, a sentiment echoed by findings from field checks.
Despite challenges in growth and sales productivity, Okta's Free Cash Flow (FCF) margins have been on an upward trend, indicating some positive developments. Nevertheless, according to DA Davidson, the improvements in FCF margins are not sufficient to counterbalance the broader trend of decelerating growth that the company is experiencing.
In other recent news, Okta reported surpassing modest revenue expectations with a 13% year-over-year increase in calculated Remaining Performance Obligations and a revenue beat of 16% year-over-year.
Despite this, Citi lowered its price target for Okta from $115 to $110, maintaining a neutral stance due to several challenging factors, including a less than 10% outlook for future performance obligations. Similarly, Mizuho Securities reduced its price target for Okta from $110.00 to $104.00, citing mixed results and competitive threats.
On the other hand, BTIG maintained its Buy rating on Okta, with a price target of $128.00, based on indications of stabilization and potential improvement in demand for Okta's services. Jefferies reiterated a Hold rating on Okta, with a price target of $110.00, awaiting clear signs of a growth inflection.
JPMorgan also maintained its Neutral rating on Okta shares, acknowledging the company's solid positioning in Identity and Access Management markets.
InvestingPro Insights
Recent analysis from InvestingPro underscores key financial metrics and projections for Okta, Inc (NASDAQ:OKTA) that investors should consider. The company holds a strong liquidity position with more cash than debt on the balance sheet and liquid assets that exceed short-term obligations, which can be a reassuring sign for investors concerned about the company's ability to meet its immediate financial commitments. Additionally, despite not being profitable over the last twelve months, analysts are optimistic about Okta's future, predicting that the company will become profitable this year.
From a valuation standpoint, Okta's market cap stands at approximately $16.24 billion, with a Price to Book ratio of 2.73 as of the last twelve months leading up to Q1 2025. This ratio can give investors an idea of how the market values the company's net assets. Moreover, the company has experienced a significant revenue growth of 20.45% during the same period, which may interest investors looking for companies with strong top-line growth. In terms of stock performance, Okta has seen a 1-year price total return of 34.34%, reflecting a robust long-term return potential that has been recognized by the market.
For those interested in further insights and metrics, InvestingPro offers additional tips on Okta's financial health and future prospects. With these insights, investors can make more informed decisions about their investments in Okta. For a deeper dive into Okta's financials and additional InvestingPro Tips, visit InvestingPro.
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