Okta Pulls Back From Highs As Earnings Approach, Analysts Trim Targets

Okta's stock (NASDAQ: OKTA) has pulled back more than 27% from May's highs, as the identity management firm heads into the next set of earnings under a little cloud, as analyst cuts dampen sentiment.

The latest firm to shift this morning is Barclays, lowering its price target on Okta to $100 from $120, maintaining an “Equal Weight” rating ahead of next week's earnings report. While expressing some caution, Barclays sees potential upside to remaining performance obligations (RPO) due to healthy activity within the federal sector. This suggests that Okta's government contracts could provide a buffer against broader market headwinds.

In the previous quarter, Okta reported earnings per share (EPS) of $0.86, exceeding the consensus estimate of $0.77. For the upcoming quarter, analysts are estimating an EPS of $0.84. These figures suggest a continued profitability trend, a factor that may be contributing to the current positive market sentiment. However, investors will be scrutinizing not only the EPS, but also Okta's revenue growth, customer acquisition costs, and forward guidance.

While Okta's innovation in AI-based authentication and its new developer portal, introduced at its annual user conference Oktane24, have been viewed positively by some, concerns remain about increasing competition, particularly from tech giants like Microsoft.

This competitive pressure was a key factor in Mizuho Securities' decision to lower its price target on Okta by 12% to $92.00, maintaining a “Neutral” rating.

Similarly, Scotiabank adjusted its outlook for Okta following the second-quarter performance, lowering the price target to $92.00 while maintaining a “Sector Perform” rating. The bank cited concerns about modest growth for the third quarter and potential pressures from companies re-evaluating software spending.

Truist Securities also revised its price target downwards, from $95.00 to $80.00, after Oktane24, emphasizing the importance of execution in translating innovation into tangible growth, especially amidst a challenging macroeconomic environment.

Bernstein has expressed confidence in Okta's potential for a “post-bottom ramp,” maintaining an “Outperform” rating despite reducing its price target from $129.00 to $124.00. This perspective offers a counterpoint to the prevailing cautious outlook.

JPMorgan, however, remains concerned about growth deceleration, reducing its price target from $105.00 to $85.00 while maintaining a “Neutral” rating. The firm anticipates that fiscal 2026 growth expectations might reflect single-digit growth, below current consensus levels.

While many analysts are focusing on potential headwinds and competitive pressures, the company's leadership in identity management, a critical component of cybersecurity, potentially positions it to capitalize on the increasing demand for secure digital access.

Furthermore, Okta's investments in AI and its developer platform could unlock new growth opportunities and solidify its competitive advantage.