On Thursday, KeyBanc Capital Markets adjusted its stance on Okta, Inc. (NASDAQ:OKTA), upgrading the stock from Sector Weight to Overweight and establishing a new price target of $115.00. The upgrade reflects a positive outlook on the company's prospects within the security sector. According to InvestingPro data, 36 analysts have recently revised their earnings expectations upward for the upcoming period, supporting this optimistic view.
The analyst at KeyBanc cited several reasons for the optimistic view on Okta's shares. A primary factor is the increasing importance of identity security, where Okta is seen to have a widening lead. The firm also finds Okta's current valuation attractive, noting that it trades at 20 times enterprise value to free cash flow (EV/FCF), which is favorable compared to its peers that grow at 5-15% and have a multiple of 28 times.
InvestingPro analysis reveals impressive gross profit margins of 76.12% and robust revenue growth of 16.84% over the last twelve months, suggesting strong operational efficiency.
Additionally, the firm anticipates that the headwinds affecting the number of seats may start to ease by fiscal year 2026. This projection is supported by recent survey data that indicates strengthening performance in the small and medium-sized business (SMB) segment. While InvestingPro data shows the company isn't currently profitable, analysts predict profitability this year, with several more valuable insights available to Pro subscribers.
KeyBanc also points to Okta's Identity Governance and Administration (IGA) and the potential contributions from Privileged Access Management (PAM) as factors that could support the company's growth. Furthermore, there is an expectation that Customer Identity and Access Management (CIAM) may experience acceleration due to improved go-to-market execution and a potentially improving macroeconomic environment.
In light of these factors, KeyBanc has also made adjustments to its estimates for Okta. The new price target of $115 represents a significant increase from the previous valuation, signaling a strong conviction in the company's future performance. The upgrade comes amid a broader analysis of the company's strategic position and financial metrics, suggesting a favorable risk/reward scenario for investors.
In other recent news, Okta, a leading identity management company, has been the subject of numerous analyst updates following a strong third-quarter performance. Baird raised its price target on Okta shares to $115, citing the company's conservative financial guidance for FY26 and its potential for substantial growth. Meanwhile, Bernstein revised its price target for Okta to $124, maintaining an Outperform rating despite the reduction.
BMO Capital retained a Market Perform rating and a $105 price target on Okta, citing a balanced outlook with equal measures of opportunities and risks. Piper Sandler also maintained a Neutral rating on Okta, raising the price target to $90 from $85, following the company's slight uptick in calculated remaining performance obligations (cRPO) growth. Citi, while maintaining a Neutral rating, increased its price target on Okta to $95, noting the company's impressive revenue growth and gross profit margins.
These updates come in the wake of Okta's robust Q3 results, which showcased a 14% increase in revenue and a 13% rise in cRPO growth. Despite some operational challenges, Okta remains a dominant player in the identity management market, benefiting from the growing adoption of Zero Trust security frameworks. These developments underscore Okta's strong performance and its position as a significant player in the identity management market.
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