Okta stock outlook dims with lowered price target, Equal Weight rating upheld

On Thursday, Wells Fargo adjusted its outlook on Okta, Inc. (NASDAQ:OKTA), reducing the price target to $90 from $100 while keeping an Equal Weight rating on the stock.

The revision follows Okta's after-market performance on Wednesday, where the stock declined approximately 9% due to the company's third-quarter CRPO (Calculated Billings) guidance, indicating an anticipated year-over-year growth of just 9%.

The analyst from Wells Fargo noted that despite Okta's successful quarter, with CRPO reaching $1.995 billion—surpassing the upper end of their guidance at $1.96 billion and marking a 13% year-over-year growth—the company's future outlook appears subdued.

Okta has managed to move past its previous security breach, but the forecasted growth slowdown is a concern. Management has expressed worries about the broader economic environment, which is affecting the acquisition of new customers, growth in Monthly Active Users (MAU) for Customer Identity, and the expansion of seats within Workforce Identity.

The report highlighted the underwhelming impact of new products on the company's performance. Okta's newly introduced offerings, including Identity Governance and Administration (IGA), Privileged Access Management (PAM), and Identity Threat Protection, are considered too minor to significantly influence overall growth figures.

The Wells Fargo analyst's comments underscore the challenges Okta faces, as management's expectations for the third quarter suggest a continued deceleration of CRPO growth to 9% year-over-year. This conservative guidance reflects the company's caution in the face of macroeconomic pressures that are hampering key growth metrics such as new logo acquisition and MAU expansion.

In other recent news, Okta, Inc. has been the subject of recent analyst attention. JPMorgan has lowered its price target for Okta to $105, maintaining a Neutral rating, citing mixed financial guidance and challenging macroeconomic conditions.

On the other hand, Evercore ISI initiated coverage on Okta with an Outperform rating and a price target of $122.00, acknowledging the company's strong performance but also noting potential macroeconomic pressures.

Okta reported solid financial results, achieving GAAP profitability for the first time and surpassing expectations with better-than-anticipated revenue, operating margin, and free cash flow. However, its guidance for the third quarter remained below consensus expectations, reflecting ongoing macroeconomic headwinds.

The company also reported a strong second quarter for fiscal year 2025, raising its full-year outlook based on solid profitability and cash flow. The full year outlook for fiscal 2025 has been revised to a 13% total revenue growth and a 21% non-GAAP operating margin.

InvestingPro Insights

In light of Wells Fargo's revised outlook on Okta, Inc. (NASDAQ:OKTA), a closer look at the company through InvestingPro metrics and tips provides additional context. With a market capitalization of $16.24 billion and a high gross profit margin of 75.15% over the last twelve months as of Q1 2025, Okta's financial health appears robust despite the challenges ahead. Revenue growth remains solid at 20.45% year-over-year for the same period, indicating the company's ability to increase its sales effectively.

InvestingPro Tips suggest that Okta holds more cash than debt on its balance sheet and that analysts predict the company will turn profitable this year. These insights are particularly relevant as they highlight Okta's financial stability and potential for future earnings growth, which may interest investors looking for a rebound in the company's performance. Additionally, with liquid assets exceeding short-term obligations, Okta's short-term financial resilience is noteworthy. For those interested in deeper analysis, InvestingPro offers several more tips on Okta at https://www.investing.com/pro/OKTA.

While Okta does not pay a dividend, suggesting a reinvestment of earnings into the company's growth, the InvestingPro Fair Value estimate of $120.56 USD exceeds the current price, hinting at a potential undervaluation. This, combined with the company's strong fundamentals, could make Okta an attractive investment opportunity, despite the cautious third-quarter guidance highlighted by Wells Fargo.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.