On Thursday, Goldman Sachs maintained its Buy rating on shares of Okta, Inc (NASDAQ:OKTA) with a steady price target of $130.00. Following Okta's first-quarter earnings report, which showed revenue and EBIT figures surpassing Wall Street expectations, the company's stock edged up by 2% in after-hours trading.
Okta's first-quarter revenue and EBIT were respectively 2% and 22% higher than the consensus estimates, with calculated remaining performance obligations (cRPO) also 2% above expectations. However, second-quarter cRPO guidance was 1% below the Street's forecast.
The updated revenue and EBIT guidance for fiscal year 2025 is now 1% and 7% above analyst predictions, signaling confidence in the company's financial trajectory. Despite the current quarter-over-quarter flat net retention rate (NRR) at 111%, Goldman Sachs anticipates a potential uptick in NRR in the medium term. This expectation is based on Okta's planned release of a broad suite of new products in 2024.
Okta's customer growth showed a sequential increase of 1% in both overall customer count and in customers with an annual contract value (ACV) over $100,000. This growth rate is below historical levels, which the company attributes to macroeconomic pressures affecting new customer acquisitions and small-to-medium sized businesses (SMBs).
Okta has not observed a significant impact from the previous year's internal security breach, although the company acknowledges that this might be due to limited visibility into the breach's effects.
Goldman Sachs suggests that Okta's management is likely factoring in a conservative outlook in its guidance due to the challenging macroeconomic environment and the potential for headwinds related to the security breach as customer renewal periods approach.
The firm remains optimistic about Okta's fiscal year 2025 estimates and believes there is considerable room for medium-term growth, driven by a substantial increase in product innovation. This sentiment is supported by the array of product updates and announcements revealed at the Okta Showcase event on May 9th.
InvestingPro Insights
Following Goldman Sachs' optimistic outlook on Okta, Inc (NASDAQ:OKTA), InvestingPro data and tips further illuminate the company's financial landscape. Okta holds a market cap of $16.21 billion, and despite a negative P/E ratio of -44.57, the company's revenue growth remains robust, with a 21.8% increase over the last twelve months as of Q4 2024. Moreover, Okta's gross profit margin stands strong at 74.33%, showcasing the company's ability to maintain profitability in its core operations.
InvestingPro Tips highlight that Okta has more cash than debt on its balance sheet and that analysts are expecting net income growth this year, with 33 analysts having revised their earnings upwards for the upcoming period. These factors suggest a sound financial position and a positive outlook among market experts. Additionally, the company's stock has experienced a significant price uptick of 43.71% over the last six months, indicating investor confidence.
For those seeking a deeper dive into Okta's financial performance and future prospects, InvestingPro offers additional insights. There are 9 more InvestingPro Tips available, which can be accessed at https://www.investing.com/pro/OKTA. Readers interested in leveraging these insights can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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