Identity and access management company Okta (NASDAQ:OKTA) has taken its shareholders on a roller coaster ride so far in 2023 (see the graph). However, the company’s Q2 performance and management’s commentary over the future trajectory of the business indicate that better days could be ahead for its shareholders. Let’s delve deeper.
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Okta’s Q2 Performance in Detail
Okta delivered a better-than-expected Q2 financial performance and raised its full-year outlook. Investors cheered the upward revision in outlook, driving its stock over 9% higher in after-hours trading. Let’s delve deeper.
The company reported revenue of $556 million in Q2, up 23% year-over-year, and surpassed the Street’s estimate of $534.67 million. Meanwhile, its adjusted earnings of $0.31 per share handily exceeded the consensus estimate of $0.22 and came well ahead of the $0.10 reported in the same quarter of the previous year.
Okta expects its top line to increase by 19% in Fiscal 2024, up from its previous growth guidance of 17-18%. Adjusted EPS is forecasted to be in the range of $1.17 to $1.20, considerably higher than its earlier projection of $0.88 to $0.93.
While Okta impressed with its Q2 earnings and full-year guidance, let’s understand what the future holds for its stock.
What is the Future of OKTA Stock?
Okta’s strong revenue base (increasing at a CAGR of 38%), growing customers (18,400 customers, up 12% year-over-year in Q2), and expansion of customers with higher annual contract value, or ACV (19% increase in customers with more than $100K ACV) augur well for growth. In addition, high subscription-based revenues, improved CRPO (Current Remaining Performance Obligations), solid retention rate, cost reduction, and a large addressable market will enable the company to deliver profitable growth.
Following the Q2 earnings report, Goldman Sachs analyst Gabriela Borges reiterated a Buy recommendation on OKTA stock. The analyst increased the price target to $100 from $91 and expects Okta to benefit from acceleration in cRPO as the “Workforce segment stabilizes” and the company “ramps on cross-sell tied to new product cycles.”
While Borges is bullish, macro headwinds keep analysts cautiously optimistic about Okta stock. Including Borges, the stock has received 16 Buy recommendations. At the same time, it has received eight Holds and one Sell recommendation. Overall, it has a Moderate Buy consensus rating on TipRanks. Further, analysts’ average price target of $92.16 implies 25.27% upside potential from current levels.
