On Tuesday, Baird has increased its price target on Okta, Inc (NASDAQ: NASDAQ:OKTA) shares to $115, up from the previous $105, while retaining an Outperform rating on the stock. The revision comes after the firm identified Okta as one of its top small to mid-cap investment ideas for the upcoming year.
The analyst at Baird cited several reasons for the optimistic outlook on Okta, highlighting the company's conservative preliminary financial guidance for FY26 and the importance of identity security as a sustained budget priority for organizations. Okta's potential for substantial growth and a higher valuation multiple were key factors in the revised price target.
Furthermore, Baird pointed to Okta's strong visibility with a coverage ratio of 77.0%, as well as its solid track record of exceeding expectations and raising forecasts for FY24 and FY25. The firm also noted Okta's go-to-market specialization across its product lines and customer personas as advantageous as the company enters the first quarter of FY26.
Okta's current trading valuation, at approximately 4.6 times its enterprise value to CY25E sales and around 16.5 times its free cash flow, is considered below that of its peers. Additionally, despite underperforming year-to-date, Baird believes Okta presents an attractive investment opportunity with the potential for double-digit growth in 2025 and sustained low-to-mid 20s percentage margins.
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