On Monday, BMO Capital maintained a Market Perform rating and a $105.00 price target on Okta, Inc (NASDAQ: NASDAQ:OKTA) shares, following insights gained from the Gartner (NYSE:IT) Identity and Access Management conference held in Texas. According to InvestingPro data, the company currently trades at $81.99, with analyst targets ranging from $75 to $140. The firm's analysis suggests a balanced outlook for Okta, with equal measures of opportunities and risks.
The BMO Capital analyst highlighted that identity and access management (IAM) spending is expected to remain relatively constant throughout calendar year 2025. Conference attendees emphasized that identity continues to be a fundamental aspect of security architectures.
This aligns with Okta's strong market position, evidenced by its impressive 76.12% gross profit margins and 16.84% year-over-year revenue growth, as reported by InvestingPro. The analyst anticipates that leading identity vendors will further consolidate spending related to identity management, although this trend is still in its early stages compared to other security sectors like endpoint and cloud security.
Based on the discussions at the conference, the analyst believes that Okta's initial revenue guidance for calendar year 25/fiscal year 26, indicating a 7% year-over-year growth, is on the conservative side. However, any potential growth is expected to be modest when compared with the compound annual growth rate (CAGR) of approximately 10% projected by Gartner for the IAM sector from 2023 to 2028.
The report also notes that Okta is likely to face ongoing challenges with upselling and a decline in seat numbers over the next few quarters. Nonetheless, these headwinds are expected to lessen in intensity. Despite these challenges, BMO Capital has chosen not to alter its estimates, price target, or rating for Okta at this time.
In other recent news, Okta, Inc. has been in the spotlight after its third-quarter results showcased a 14% increase in revenue and a 13% rise in calculated remaining performance obligations (cRPO) growth.
Analysts' reactions have been mixed, with several investment firms adjusting their price targets for the company. Piper Sandler and Citi maintained their Neutral ratings, albeit with increased price targets to $90 and $95, respectively. Meanwhile, KeyBanc maintained a Sector Weight on Okta, expressing a positive outlook on the company's potential role as a consolidator of identity services.
Needham increased its price target for Okta to $115, sustaining a Buy rating, reflecting the company's improved performance. Scotiabank (TSX:BNS) and Truist Securities also raised their price targets to $96 and $92, respectively, while maintaining their Sector Perform and Hold ratings.
Despite these positive adjustments, Okta's preliminary revenue growth guidance for fiscal year 2026 suggests a conservative 7% year-over-year growth, which falls short of the Street's forecast.
These developments follow Okta's stronger than expected results, including a significant year-over-year increase in Remaining Performance Obligations (RPO) and cRPO that exceeded estimates. However, the company's preliminary forecast for fiscal year 2026 indicates ongoing uncertainty regarding the timing of potential growth inflection.
Despite some operational challenges, Okta remains a dominant player in the identity management market, benefiting from the growing adoption of Zero Trust security frameworks.
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