OKTA: Future Identity Data Compliance And AI Security Will Drive Performance

Analysts have modestly reduced their price target on Okta, trimming fair value estimates by about $7 to reflect slightly slower projected revenue growth and a lower future earnings multiple, even as profit margin expectations edge higher.

Analyst Commentary

Bullish Takeaways

• Bullish analysts note that management's guidance still implies solid mid-teens top-line expansion over the medium term, which supports a premium to slower-growing security peers despite the lower price target.
• Expectations for remaining performance obligation growth of around 10 percent year over year, with a credible upside scenario toward 13 percent, reinforce the view that demand for Okta's platform remains resilient.
• Improving margin trends and a clearer path to sustainable profitability are cited as key offsets to the modestly slower revenue outlook, which helps underpin current valuation levels.
• Analysts see continued adoption of identity security and consolidation of point solutions as structural tailwinds that can sustain Okta's growth and justify a higher multiple if execution remains consistent.

Bearish Takeaways

• Bearish analysts highlight that trimming the price target signals diminished confidence in Okta's ability to reaccelerate growth, which could cap near term multiple expansion.
• The base case for remaining performance obligation growth near 10 percent is viewed as a step down from prior years, raising concerns that competitive intensity and macro headwinds may be weighing on new business.
• Some are cautious that any upside scenario for growth, such as reaching 13 percent remaining performance obligation expansion, may require stronger than expected execution around large enterprise deals and cross selling.
• There is concern that investors may already be pricing in a meaningful improvement in profitability, leaving limited room for error if margins or billings volatility disappoint against expectations.

What's in the News

• Issued updated guidance for fiscal 2026, projecting total revenue of $2.906 billion to $2.908 billion, up 11 percent year over year, and fourth quarter revenue growth of about 10 percent with current RPO growth of 9 percent (Corporate guidance).
• Announced a new full service Okta cell in Canada to keep customer identity data in country, support data residency, provide enhanced disaster recovery with a five minute recovery target, and expand French language product support for Quebec and Francophone users (Business expansion).
• Introduced new Okta and Auth0 platform capabilities to secure AI agents and enable tamper proof verifiable digital credentials, aiming to provide centralized, standards based identity security for both human and non human identities (Product related announcement).
• Enabled Fullpath to launch a Single Sign On integration with Okta, giving auto dealerships streamlined and secure access to customer data and tighter permission management via existing enterprise identity providers (Client announcement).
• Expanded integration with MIND to link Okta identity signals with AI driven data security controls, helping enterprises automatically enforce context aware policies and mitigate insider risk at scale (Client announcement).

Valuation Changes

• Fair Value: Reduced modestly from about $118.80 to $111.62 per share, reflecting a slightly more conservative outlook.
• Discount Rate: Edged down marginally from roughly 9.12 percent to 9.04 percent, implying a slightly lower required return.
• Revenue Growth: Trimmed from approximately 9.62 percent to 8.98 percent, indicating a small downgrade to long term growth expectations.
• Net Profit Margin: Increased slightly from about 11.45 percent to 11.53 percent, reflecting incremental improvement in projected profitability.
• Future P/E: Lowered from roughly 70.7x to 66.9x, suggesting a modestly lower valuation multiple on expected earnings.