Okta Inc. shares rallied Thursday as Wall Street greeted the identity-management software company’s forecast of profitability for the year with cautious optimism as it navigates a tight cloud-software spending environment. Okta
shares rallied nearly 15% to an intraday high of $81.55 Thursday, just a quarter after posting their strongest day ever, after Okta Chief Executive Todd McKinnon pledged profitability in 2024. This time around, that profitability forecast ended up being more than twice what Wall Street had been expecting, but many analysts had likely been taking a wait-and-see approach.
Citi Research analyst Fatima Boolani, who has a neutral rating on the stock and an $87 price target, called Okta’s report a “high-octane turnaround in motion.” The outlook continues to be underpinned by “‘hyperconservatism’/prudence against still-tough macro (mostly Americas, weakness seeping into enterprise) and suboptimal sales productivity hangover.” The hangover Boolani is referring to is Okta’s refocusing of its sales force following its $6.5 billion acquisition of identity-platform Auth0 (pronounced “Auth Zero”), which closed in May. After inheriting a large sales force from Auth0, Okta experienced initial difficulties in coordinating who was selling what products. “While Okta admittedly appears partially out of the woods, this being the first quarter of self-help-led recovery plus our skittishness on renewals/shortening contract duration/new logos, keep our optimism/rating in check,” Boolani said. Read: Cloud software is a ‘fight for a knife in the mud,’ and Wall Street is souring on the one sector that was winning Jefferies analyst Joseph Gallo, who has a buy rating and a $100 price target, said Okta’s outlook “remains abundantly prudent,” and that results had been “better-than-feared” given “tempered expectations.” Guggenheim analyst John DiFucci, who has a buy rating and a $90 price target, said Okta is just trying to “keep it simple” to set up another beat-and-raise quarter. “While our field work indicates some improvement in Okta’s go-to-market motion, the company still has work to do,” DiFucci said. “Regardless, we continue to believe that there’s little risk in FY24 guidance.” Morgan Stanley analyst Hamza Fodderwala, who has an equal-weight rating and an $84 price target, said the real surprise from the report was that the …