On Wednesday, Scotiabank (TSX:BNS) updated its outlook on Okta, Inc (NASDAQ: OKTA), increasing the price target to $96 from the previous $92, while keeping a Sector Perform rating on the stock. The adjustment comes after Okta surpassed its calculated Remaining Performance Obligations (cRPO) targets considerably in the third quarter. The company, currently valued at $13.88 billion, has maintained strong revenue growth of 18.74% over the last twelve months.
However, the company's initial revenue guidance for fiscal year 2026 suggests a slowdown in momentum, even with the usual pattern of beating and raising expectations. According to InvestingPro data, analyst targets for the stock range from $75 to $140, reflecting mixed sentiment about its growth trajectory.
Okta, a leading provider in the security sector, experienced a decline in its Net Revenue Retention (NRR) during the third quarter, and the additions to its customer base did not meet expectations. According to management, this was due in part to enterprises scaling back spending upon contract renewal.
Further concerns were raised about Okta's operational incidents, which, as per extensive customer checks, appear to be influencing the company's growth. New clients are reportedly choosing competitors, and existing Okta customers are hesitant to adopt additional software offerings. Despite these challenges, InvestingPro's analysis shows the company maintains impressive gross profit margins of 75.82% and holds more cash than debt on its balance sheet.
Despite these challenges, there is a positive aspect to Okta's financials. The company has shown an improvement in operating margin, a trend that is expected to continue. Management's initial guidance for the operating margin in fiscal year 2026 has been well-received, with expectations that the actual results will surpass the guidance.
In light of these developments, Scotiabank acknowledges Okta's significant role in the security field but advises caution regarding investment in the company's stock at this time. This stance is taken even as Okta's shares showed an uptick, indicating a 15% increase in after-hours trading.
In other recent news, Okta Inc (NASDAQ:OKTA). has been the subject of numerous analyst updates following its third-quarter fiscal year 2025 results.
The company's revenue increased by 14% and calculated remaining performance obligations (cRPO) growth rose by 13%. Among the firms adjusting their outlooks, Truist Securities raised its price target to $92 from $80, maintaining a Hold rating. Canaccord Genuity (TSX:CF) also maintained a 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 (TSX:TD) Cowen held steady with a price target of $110, while BTIG analyst Gray Powell increased the price target to $110, maintaining a Buy rating on the stock. These updates come in response to Okta's strong financial performance and recent revenue and earnings figures.
However, Okta's preliminary guidance for fiscal year 2026 indicates a top-line growth of 7% year-over-year, which falls short of the consensus expectation of 10% growth. Despite this, the company maintains strong financial flexibility with more cash than debt on its balance sheet.
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