Okta Inc (OKTA) shares experienced a significant drop in early trading on Thursday, even after the company announced strong second-quarter results. While Okta exceeded both revenue and earnings expectations, concerns arose from a slowing subscription revenue growth rate and conservative guidance for the third quarter. This mixed message from Okta led to a range of reactions from analysts, resulting in various price target adjustments.
Key Analyst Takeaways
DA Davidson analyst Rudy Kessinger maintained a Neutral rating on Okta but lowered the price target from $100 to $85. Kessinger highlighted a deceleration in subscription revenue growth to 17% year-on-year, down from 20% in the previous quarter. He also expressed concerns about the company’s current remaining performance obligation (cRPO) guidance for the third quarter, which fell short of analyst expectations.
BMO Capital Markets analyst Keith Bachman maintained a Market Perform rating but raised the price target from $100 to $103. Bachman acknowledged the moderate deceleration in cRPO growth but considered it still “solid.” He expressed optimism about Okta’s strong execution in enterprise deals, which lead to larger contract sizes and longer durations.
Scotiabank analyst Patrick Colville reiterated a Sector Perform rating while lowering the price target from $104 to $92. Colville noted that Okta’s cRPO surpassed guidance but by a smaller margin compared to recent quarters. He expressed disappointment with the company’s forward guidance, indicating a mere 9% growth for the third quarter. Colville also pointed to a decline in net revenue retention (NRR) and a potential further dip in the second half of the year.
Stifel analyst Adam Borg reaffirmed a Buy rating, albeit with a reduced price target from $122 to $108. Borg acknowledged Okta’s strong execution against conservative guidance, which led to exceeding key financial metrics. He acknowledged the positive aspects, such as traction with newer products and increasing contract durations, but also emphasized the continued impact of macro headwinds.
WestPark Capital analyst Casey Ryan maintained a Buy rating and price target of $140. Ryan focused on the company’s higher sales to larger customers but noted softness in new customer wins. He emphasized the importance of total RPO (remaining performance obligation) as a more meaningful metric.
Truist Securities analyst Joel Fishbein reiterated a Hold rating while lowering the price target from $105 to $95. Fishbein acknowledged the “solid” results and raised revenue and profit outlook for fiscal 2025. However, he expressed disappointment with the cRPO guidance for the third quarter.
Piper Sandler analyst Rob Owens reaffirmed a Neutral rating while reducing the price target from $110 to $100. Owens noted the upside to conservative guidance but found it overshadowed by the “mixed” fiscal 2025 guidance.
RBC Capital Markets analyst Matthew Hedberg maintained an Outperform rating and a price target of $125. Hedberg viewed the third-quarter cRPO guidance of 9% year-on-year growth as conservative compared to the second quarter. He also expressed optimism about the company’s future growth potential.
Okta’s Price Action
Okta’s stock price had declined by 16.51% to $80.60 at the time of publication on Thursday.
