Wells Fargo (NYSE: WFC) just upgraded Okta (NASDAQ: OKTA) to an overweight rating, with a price target of $180 a share. The upgrade is significant because Okta has spent the past few years dealing with investor concerns about slowing growth.
Now, Wells Fargo believes those concerns may be starting to fade as demand for identity and access management products improves and Okta makes progress with its business strategy.
According to CNBC, Wells Fargo analyst Richard Poland said Okta’s focus on large enterprise customers, expansion of its partner network, increased cross-selling of identity governance products and renewed attention on Auth0 are beginning to produce results.
Poland also suggested that the company is “not fully appreciated by the current share price.”
There Are Encouraging Signs
Okta’s first-quarter fiscal 2027 results showed revenue increasing by 11% year over year to about $765 million, while adjusted earnings per share came in at $0.91, beating the $0.85 estimate. The company also generated approximately $271 million in free cash flow during the quarter. The company also guided for fiscal 2027 revenue growth of between 9% and 10%, suggesting management expects the business to maintain steady growth.
For its second quarter earnings, expected on August 26, Wall Street is looking for revenue of about $793 million and adjusted EPS of about 96 cents.
Investors will be paying close attention to several numbers beyond revenue and earnings. Remaining performance obligations, or RPO, will be particularly important because they provide insight into contracted revenue that has not yet been recognized.
The company’s guidance for the remainder of fiscal 2027 will also be closely watched. If Okta can deliver better-than-expected results while maintaining or raising its outlook, it could provide additional support for the bullish argument behind Wells Fargo’s upgrade.
AI Could Create a New Growth Opportunity
Artificial intelligence could give the company another avenue for growth. The rise of AI is creating a new security challenge for businesses. Companies are no longer managing access only for human employees. AI agents are increasingly capable of interacting with applications, databases, and other business systems. Okta believes its identity-management technology can help companies secure these new AI-driven systems. The company has been developing products designed to manage and protect AI agents.
If businesses increasingly rely on AI, securing these systems could become a significant market opportunity for Okta. However, the opportunity is still relatively new. Investors will ultimately want to see whether Okta’s AI products generate meaningful revenue rather than simply expanding the company’s product lineup.
What Investors Should Watch
The Wells Fargo upgrade comes at an important moment for Okta.
The company is no longer growing at the high rates investors saw during its earlier years. However, several factors could support the stock going forward.
Demand for identity security remains important as businesses continue moving applications and data to the cloud. At the same time, the rapid adoption of AI is creating new types of digital identities that companies will need to secure.
The company is also generating significant free cash flow, giving it financial flexibility to invest in new products and growth opportunities. Ultimately, the biggest question is whether these opportunities can translate into faster revenue growth.
If demand continues to improve and the company executes its strategy successfully, making AI security a meaningful new market, the company could be in a stronger position than when investors were primarily focused on slowing growth.
For now, Wells Fargo’s upgrade suggests Wall Street is becoming more confident that Okta’s growth story may be turning a corner.