Celebrations may be in order for Okta, Inc. (NASDAQ:OKTA) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The analysts have sharply increased their revenue numbers, with a view that Okta will make substantially more sales than they'd previously expected.
After this upgrade, Okta's 24 analysts are now forecasting revenues of US$1.2b in 2022. This would be a substantial 35% improvement in sales compared to the last 12 months. Losses are supposed to balloon 45% to US$3.57 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$1.1b and losses of US$2.76 per share in 2022. So there's been quite a change-up of views after the recent consensus updates, with the analysts significantly increasing their revenue forecasts while also expecting losses per share to increase. It looks like the revenue growth will not be achieved without incremental costs.
The consensus price target stayed unchanged at US$273, seeming to suggest that higher forecast losses are not expected to have a long term impact on the valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Okta at US$300 per share, while the most bearish prices it at US$235. Still, with such a tight range of estimates, it suggests the analysts have a pretty good idea of what they think the company is worth.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that Okta's rate of growth is expected to accelerate meaningfully, with the forecast 50% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 37% p.a. over the past three years. Compare this with other companies in the same industry, which are forecast to grow their revenue 15% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Okta to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for this year. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. Seeing the dramatic upgrade to this year's forecasts, it might be time to take another look at Okta.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Okta going out to 2024, and you can see them free on our platform here..
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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