On Wednesday, Needham, a well-respected investment firm, increased its stock price target for Okta, Inc (NASDAQ: NASDAQ:OKTA) to $115 from the previous $100, while reaffirming its Buy rating on the stock.
Currently trading at $81.71 with a market capitalization of $13.88 billion, InvestingPro analysis suggests the stock is undervalued. The adjustment follows Okta's recent financial results, which highlighted improved company performance, particularly with Large Customers, Partners, and New Products.
The firm's analysis suggests that Okta is showing early signs of product adoption following a significant expansion of its offerings in recent quarters. With impressive gross profit margins of 75.82% and strong revenue growth of 18.74% over the last twelve months, the company demonstrates robust operational efficiency.
According to InvestingPro, analysts expect net income growth this year, one of several positive indicators available to Pro subscribers. Moreover, the challenges posed by the "COVID cohort" are anticipated to lessen after the first half of fiscal year 2026. Despite management's preliminary projection of a 7% year-over-year growth in FY26, which is below the 10% expected by the Street, Needham maintains a positive outlook.
The preliminary outlook presented by Okta's management is perceived as conservative, especially considering the current cRPO (calculated Remaining Performance Obligations) guidance for the fourth quarter of FY25.
Historically, Okta's Subscription Revenues have been about 1.3 times the previous year's cRPO balance. Needham suggests that if Okta exceeds its cRPO guidance for Q4 FY25 and sees renewed acceleration in cRPO due to its go-to-market strategy and new product introductions, the company could easily surpass the conservative 7% growth forecast.
Needham's stance is that despite the market potentially reacting negatively to the conservative growth outlook for FY26, Okta's strong performance and strategic moves position it well for future growth. The firm's revised price target reflects confidence in Okta's ability to outperform expectations and continue on its growth trajectory.
InvestingPro subscribers can access 6 additional ProTips and a comprehensive research report that provides deeper insights into Okta's financial health, which currently rates as "GOOD" based on multiple financial indicators.
In other recent news, Okta, Inc. has been the focus of several analyst updates following its third-quarter fiscal year 2025 results that demonstrated a revenue increase by 14% and calculated remaining performance obligations (cRPO) growth rise by 13%. Scotiabank (TSX:BNS) has updated its outlook on Okta, raising the price target to $96 while maintaining a Sector Perform rating.
Truist Securities also adjusted its price target on Okta to $92, keeping its Hold rating. Canaccord Genuity maintained its Hold rating but increased the price target to $94. Mizuho (NYSE:MFG) maintained a neutral stance but raised Okta's price target to $100. TD Cowen held steady with a price target of $110.
Despite these adjustments, Okta's initial revenue guidance for fiscal year 2026 suggests a slowdown in momentum. The company, however, maintains strong financial flexibility with more cash than debt on its balance sheet. These are recent developments that investors should keep in mind.
The company has shown an improvement in operating margin, a trend that is expected to continue. Despite operational incidents and a decline in its Net Revenue Retention (NRR) during the third quarter, Okta continues to maintain impressive gross profit margins of 75.82%.
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