Since the start of the year, Okta (NASDAQ: OKTA) rocketed from a Jan. 2 low of about $83.37 to $166.23. Fueling part of that run was Wells Fargo (NYSE: WFC), which upgraded the cybersecurity stock to an overweight rating with a price target of $180. The firm cited improving demand and growing confidence that Okta may be entering a stronger period of growth.
Analysts at Needham also raised the firm’s price target on OKTA to $200 from $140 and maintained a buy rating. According to the firm, as quoted by Seeking Alpha, “We believe Okta is benefiting from an improved environment, where customers are modernizing their Identity posture, alongside the company’s ability to continue increasing seat count with customers and upselling new products from the broader portfolio.”
Bank of America (NYSE: BAC) raised its price target to $170 from $75, noting that company’s newer products are gaining traction, representing 30% of bookings in the second quarter, as compared to 25% in the first quarter. Analysts at Guggenheim reiterated a buy rating with a $188 price target, while analysts at Stephens reiterated an overweight rating with a $190 price target.
Demand for Identity Security Is Improving
One of the biggest reasons behind Wells Fargo’s upgrade is a change in corporate spending priorities. According to the firm, identity security has become a much more important area of investment for businesses. In fact, identity security is quickly becoming a top spending priority for companies, especially as remote work and cloud apps create potential breach risks.
As noted by OKTA co-founder and CEO Todd McKinnon, “As AI agents transform every layer of technology, every agent needs a trusted identity and clear controls over what it can access and do,” co-founder and CEO Todd McKinnon said, as quoted by Security Week.
Earnings Have Been Just as Explosive Thanks to Demand
In fact, its most recent quarter, the company’s EPS of $1.05 beat by nine cents. Revenue of $805 million, up 10.6% year over year, beat by $11.97 million.
“Our Q2 performance was highlighted by accelerating cRPO (current remaining performance obligations), success with our largest customers, and strong profitability and cash flow,” said Brett Tighe, Chief Financial Officer (CFO), as quoted in the company’s earnings report. “Steady momentum from core Okta workforce and customer identity drove ACV acceleration in both businesses. Top-line growth also benefited from strong contributions from our portfolio of new products, led by Okta Identity Governance.”
For Q3 FY2027, the company expects revenue to grow by 10%, with current RPO growth of 11% to 12%, a non-GAAP operating margin of 24% to 25%, and a free cash flow margin of 21% to 23%. For the full year FY2027, the company now expects revenue growth of 10% to 11%, a non-GAAP operating margin of 26%, and a free cash flow margin of 28% to 29%.
Improving demand for identity security, growing adoption of its newer products, and better-than-expected earnings all point to a business that may be finding its footing again.
That said, with the stock already up significantly from its January lows, expectations are clearly higher. For investors, the key question now is whether the company can continue delivering the kind of growth and profitability that has fueled its recent rally.
If demand for identity security continues to accelerate and the company can successfully expand its newer product offerings, there could still be room for OKTA to move higher.
