On Thursday, Scotiabank adjusted its stock price target for Okta, Inc (NASDAQ:OKTA), a leading identity management company, from $104 down from the previous target of $110. The firm maintained its Sector Perform rating on the stock.
The adjustment followed Okta's first-quarter results, which showed the company beat the Street's current Remaining Performance Obligations (cRPO) estimates, although by a slimmer margin compared to recent quarters. The company's guidance for the second quarter was characterized as slightly underwhelming, with anticipation of a continued deceleration in cRPO.
Scotiabank noted that Okta's Net Retention Rate (NRR) has stabilized, which is viewed positively. However, there is concern over the pace at which Okta is acquiring new logos, suggesting that the company's growth in new business may not be accelerating as hoped.
The analyst from Scotiabank raised questions about whether Okta's financial performance might be suffering from the reputational impact of security incidents that occurred in 2022 and 2023, speculating that these issues could be causing potential new clients to look elsewhere and existing customers to hesitate in expanding their use of Okta's services.
Despite these challenges, Okta is recognized as a top vendor in the crucial area of security. Scotiabank's viewpoint is that the risk/reward profile for Okta's shares is balanced at this time. The firm indicates that it is looking for signs of stabilization before altering its position on the stock. The reiterated Sector Perform rating reflects a neutral stance on Okta's shares, as the market awaits further developments.
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