Sage Investment Club

Michael Vi Okta (NASDAQ:OKTA) shares rose 6% in premarket trading on Thursday after investment firm Needham upgraded the stock and the identity management company said it would let go around 5% of its workforce. Needham analyst Alex Henderson raised his rating on Okta (OKTA) to buy from hold and put a per-share price target of $90, stating the company has righted the problems that were caused by the Auth0 acquisition and issues related to enterprise sales. “We think the growth bar set at 16%-17% in [fiscal 2024] is easily beatable as it was set before evidence of the fixes kicked in,” Henderson wrote in a note to clients. He added that the Customer business, which counts for 45% of revenue, is growing between 30% and 35%, should help the company meet its fiscal 2024 guidance by itself. And when combined with the Workforce business, which is adding “solidly to growth,” there will be room for “expanding profitability and margins.” Regarding the Auth0 acquisition, Henderson noted that it ran into trouble integrating it into its customer identity and access management, or CIAM products, due to high turnover, but that issue looks to have ceded. “Our field work suggests the Customer-facing business is now running smoothly and growing strongly,” Henderson added. The analyst also said federal security spending is likely to be up 20% year-over-year in fiscal 2023 and remain strong into fiscal 2024, with Okta (OKTA) getting close to achieving FedRamp High status, which he believes will “open considerable business potential.” Additionally, Okta (OKTA) achieved IL4 authorization from the Department of Defense in May 2022, which makes it “well positioned” for major deals from the DoD, Henderson posited. Separately on Thursday, Okta (OKTA) announced that it would cut 300 full-time jobs, or roughly 5% of its workforce, resulting in a $15M restructuring charge to be taken in the fourth-quarter of fiscal 2023. Earlier this week, Oppenheimer upgraded Okta (OKTA), citing a survey that showed “generally happy customers.” Analysts are largely bullish on OKTA (OKTA). It has a BUY rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha’s quant system, which consistently beats the market, rates OKTA a HOLD.

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