On Thursday, KeyBanc maintained a Sector Weight rating on Okta, Inc (NASDAQ:OKTA), following the company's release of its first-quarter results and future guidance. Okta reported a solid yet smaller than usual beat in calculated remaining performance obligations (cRPO) and revenue for the first quarter. However, the projected cRPO growth of 10-11% year-over-year for the second quarter fell short of the expected 12%.
The company's guidance for fiscal year 2025 revenue, EBIT, and free cash flow (FCF) margin was notably above prior estimates. Management noted that despite the lack of a quantifiable impact from the October security breach, they are maintaining a cautious outlook in their guidance. This is due to the presence of some customers still frustrated by the incident, whose contracts are pending renewal.
Okta's acquisition of new logos was reported to be lower than usual, with 150 new logos and a decrease in the addition of customers spending over $100,000 annually, down to 65 from a consistent 120+ in previous quarters. The Net Revenue Retention (NRR) rate remained stable at 111%.
The firm acknowledged Okta's potential as a consolidator in the identity security space and the existence of several product catalysts, such as Identity Governance and Administration (IGA), Privileged Access Management (PAM), Customer Identity and Access Management (CIAM), and Identity Threat Detection and Response (ITDR).
Despite these positive factors, KeyBanc expressed caution regarding the potential impact of the security breach on customer acquisitions and the flat sequential cRPO growth for the first quarter, as well as the second quarter guide, which may limit the upside to revenue growth for fiscal year 2025.
KeyBanc concluded that Okta's shares appear to be fairly valued at 6.6 times enterprise value to revenue (EV/rev), in comparison to its peers in the 10-20% growth category, which trade at around 7.3 times EV/rev.
InvestingPro Insights
As Okta, Inc (NASDAQ:OKTA) navigates through its post-earnings landscape, the latest data from InvestingPro provides a nuanced perspective on the company's financial health and market performance. With a market capitalization of $16.21 billion and a revenue growth of 21.8% in the last twelve months as of Q4 2024, Okta demonstrates a solid growth trajectory. Despite a negative P/E ratio of -44.57, which reflects the company's current unprofitability, the adjusted P/E ratio shows an improvement to -40.72, indicating potential for recovery.
InvestingPro Tips highlight that Okta holds more cash than debt, an indicator of financial stability, and analysts have a positive outlook with 33 revisions upwards for earnings in the upcoming period. Additionally, while Okta does not currently pay a dividend, the company is expected to become profitable this year, which is a significant turnaround from the last twelve months. This aligns with the strong gross profit margin of 74.33% as of Q4 2024, underscoring the company's efficiency in generating revenue from its sales.
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