Okta Crashes after Conservative Outlook, Analyst Downgrade
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Okta Crashes after Conservative Outlook, Analyst Downgrade

Shares of identity and access management company, Okta (NASDAQ: OKTA) plunged in morning trading at the time of publishing on Thursday even as the company delivered strong Q1 results.

The company generated Q1 revenues of $518 million, an increase of 25% year-over-year and beating consensus estimates by $7.3 million. The company’s subscription backlog at the end of the first quarter was $2.94 billion, up by 9% year-over-year. Adjusted earnings in Q1 came in at $0.22 per diluted share versus an adjusted loss of $0.27 per share in the same period last year and exceeding consensus estimates of $0.12 per share.

Okta, however, remained “conservative” in its guidance and expects its Q2 revenues to be in the range of $533 million to $535 million, up by 18% year-over-year while adjusted earnings per share are projected to be between $0.21 and $0.22 per share. For FY24, the company anticipates generating revenues between $2.175 billion and $2.185 billion, indicating year-over-year growth of 17% to 18% while adjusted diluted earnings per share is likely to be in the range of $0.88 to $0.93.

The company’s management stated the reason for the conservative outlook as there is “increased pressure from the macroeconomic environment.”

This sentiment was also echoed by top-rated JP Morgan analyst Brian Essex who downgraded the stock to a Hold from a Buy and also lowered the price target to $85 from $95. The analyst’s new price target implies an upside potential of 17.9% at current levels.

Essex commented, “With growth expected to deteriorate near term, and cash flow not yet at levels to support valuation, we see more favorable risk-reward elsewhere within our coverage and are stepping to the sidelines.”

Other Wall Street analysts, however, remain cautiously optimistic about Okta stock with a Moderate Buy consensus rating based on 19 Buys, 10 Holds, and three Sells.


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