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OKTA Stock Forecast 2025: Is OKTA Stock A Good Buy?

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Okta  stock forecast announced its first-quarter results as an organization, including Auth0, for the first time a few days ago.

The quarter’s results were extraordinarily encouraging, but the stock market’s reaction was significantly less so.

The company exceeded all of the revenue metrics that were generally forecasted, both on a legacy (i.e. Okta solely) and combined basis.

The business boosted guidance, which was smart to say the least, and based on the published sub-headline revenue indicators, the prediction appears likely to be exceeded.

Okta  stock forecast is increasing its market share in the identity management arena and appears to be on track to dominate the Customer Identify and Access Management component in the next years.

 

Okta is a two-sided identity management behemoth.

Okta  stock forecast may not be a household name, but it is the market leader in cloud-based identity management, which is a key component of any cybersecurity strategy.

Okta shares have recently been in a holding pattern, which is annoying for current holders and, in my opinion, represents a significant chance to acquire shares in a category leader at a relative valuation not seen in some time.

The bearish thesis is as follows: Everyone has an identity management solution, right? Isn’t identity management a crowded field? Okta  stock forecast (OKTA(OKTA) )’s days as a fast-growing cybersecurity company are coming to an end, right?

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For the better part of a year, that has essentially been the consensus investment judgment for Okta stock forecast. I came to a different conclusion, implying that the Okta  narrative is still in its early stages and that the current share price dip represents an outstanding purchasing opportunity.

Some will argue that Okta  stock forecast shares are not particularly cheap, but I believe that the excellent results of the most recently reported quarter indicate that the current market valuation does not accurately reflect the trends that have recently animated the business and are likely to shift the company’s growth rate to higher levels for a longer period.

While the company is not expected to post positive earnings this year as a result of the major merger with former competitor Auth0, free cash flow generation is expected to be significant in the coming year, and profit margins should begin to ramp as the integration progresses and the impact of purchase accounting fades.

okta stock forecast, During the company’s most recent earnings call, the CFO increased the company’s free cash flow estimate to a margin in the mid-single digits, and outcomes through the first half of the year were at a faster run rate than that.

The cyber threat landscape is evolving, and fraudsters are becoming more daring. Of course, the headlines are inevitably dominated by massive breaches and ransomware attacks against high-profile targets.

However, fraudsters come in different shapes and sizes, and identity management is an essential component of any enterprise’s overall security strategy.

Some of the most recent significant breaches have resulted from false identity credentials, costing victims hundreds of millions of dollars. Given the comparatively low cost of a broad set of identity management technologies, the payback is evident.

Furthermore, it is difficult to deny that Okta is the market leader in identity management solutions, particularly with the acquisition of Auth0, albeit, unsurprisingly, there are countless competitors of all shapes and sizes. Later in this post, I’ll go over competition.

Over the years, I have gambled on the most renowned advanced technology mainstream suppliers in the cybersecurity area, such as CrowdStrike (CRWD) and Zscaler (ZS), however I also had a position in Rapid7 (RPD) until earlier this year.

In fact, those two stocks currently account for around 20% of my Ticker Target High-Growth portfolio, and some of my financial advising clients have a higher allocation in the space.

 

But I’ve chosen to start adding a third cybersecurity position by purchasing Okta stock. Even after normalizing for the impact of the Auth0 acquisition, Okta’s growth accelerated significantly in the fourth quarter.

Moreover, despite the merger expenses, the company is exceeding profitability and cash flow projections. No, the identity management area is far from saturated, and as it evolves, the definition of identity management has increased and will certainly continue to do so in the future.

To be entirely upfront with readers, I initiated a beginning position prior to the release of Okta’s earnings, and this post will not be published until after the earnings, which were revealed on Wednesday, September 1st.

I don’t want to imply that I had or had a special crystal ball as to what Okta will reveal or what their guide would be, but I was willing to take such a chance with a starter position.

I expected an upside to be disclosed, as well as more clarification about the financial implications of the Auth0 transaction, but it was and still is difficult to determine what level of expectations had been built into the present price.

As it happens, the firm listened to complaints that its disclosure about Auth0 was less than transparent last quarter; this quarter, almost every number conceivable was separated between stand-alone Okta and Okta plus Auth0. While the company did end up producing very solid figures, it appears that investors were anticipating more, though on what basis is unclear.

This is one of those quarters where the phrase “buy the rumor, sell the news” was appropriate, but the results and conference call presentation have given me the confidence to continue to add to my beginning position. I strongly advise readers to take advantage of what I consider a valuation anomaly to start or add to investments.

Company management stated that while it will continue to disclose Auth0 recognized revenues in future periods, it would not continue to disaggregate every single statistic. As Auth0 becomes more deeply integrated with Okta, it will become more difficult to distinguish what component of the business is a result of the acquisition from what component is core Okta.

Okta shares rose 14 percent in the week before earnings were disclosed, possibly as a result of a hefty upgrade by Raymond James analyst Adam Tindle. On the other hand, the shares had been in a downtrend since August 5th, and the latest rally essentially retraced the down move.

Many cybersecurity names were strong at the end of August; more investors are realizing that the cybersecurity industry is still growing and that the recent significant breaches announced this spring are part of a growing threat environment.

However, this appears to have altered as the calendar flipped to September. The trading of cybersecurity names in recent weeks has been more than a little perplexing. On Friday, September 10th, after announcing what was undoubtedly one of Zscaler’s strongest quarters ever, company shares were down approximately 3.5 percent.

And, of course, CrowdStrike shares have had their valuation fall by around 8.4 percent since they reported profits, owing to yet another blowout quarter and another increase in outlook.

Perhaps investors assume that lions will lie down with lambs and that the cyber threat landscape will mend on its own. Or… I’m not sure I have anything meaningful to say about the uninterested reaction to some blowout results.

However, I believe that any IT growth portfolio should be overweight in cybersecurity names, and I believe that adding a stake in the identity management space is a viable strategy.

This writer is perplexed by the reaction of Okta shares following the results announcement. As I will explore further in this post, a comprehensive examination of the metrics released and the metrics suggested reveals a very clear picture of a company that is blazing on all cylinders, with the promise of rapid growth and continuous over-attainment.

In these days of algorithmic trading, it can be difficult to grasp shorter-term share price movement, and some people’s efforts to identify a rational reason for the decrease of these shares after earnings are, at best, perilous.

When unusual share price movements occur, I believe that investors with a little of perspective and patience should consider them as an opportunity rather than a source of concern.

Okta shares were down 4.7 percent during trading on Friday, September 10th, and are now down about 4 percent since the business disclosed earnings. Given the substantial drop in the shares on Friday, I’ve begun to move beyond a beginning position in terms of my personal commitment to the shares.

At this point, Okta shares have essentially been in a holding position for about a year. Last October, the shares reached $243 per share, and as I write this on Friday, September 10th, they are trading around $254. On a year-to-date basis, the stock is only slightly higher.

The combination of a relatively flat share price and substantially rising revenues has pushed my EV/S ratio prediction for the company below 21X.

For the first time in many years, the company’s valuation is lower than the average for its growth cohort, which I estimate to be roughly 40%. To put the valuation in context, Okta shares are priced at roughly the same EV/S as shares of nCino (NCNO), Avalara (AVLR), and Dynatrace (DYT) (DT).

While Okta does not currently have the free cash flow margins of either of the two other advanced technology cybersecurity vendors, CrowdStrike or Zscaler, and its growth rate has not and is unlikely to reach the stratospheric levels of those two vendors, as the effects of the Auth0 merger begin to produce a variety of revenue and cost synergies, and as the deferred revenue write-down burns off, the prospective free cash flow margin is likely to achieve strong positive growth.

Long-term institutional investors are still looking for cybersecurity vehicles that meet their criteria for valuation, growth, and profitability. I believe the shares have finally made a run on all three points.

 

Recommended article:

 

Okta and Identity Management: Not all identity management solutions are fungible.

Identity management is a two-faced app. One of these is workforce identity, which is a key component of Okta. It’s been around for quite some time. The app is recognizable to most people in the modern workforce because they use it to sign-on to their devices and gain access to multiple applications and data sources.

It is commonly referred to as single sign-on (SSO), and modern businesses would struggle to function without it.

Despite its simplicity, the network of permissions and data sources has made this application increasingly sophisticated over time, and it is frequently the target of fraudsters who exploit it to get access to business data and initiate ransomware attacks.

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I’ve included a link to a commercial/blog from one seller in the field that might be of interest to readers. The presentation concludes that ransomware attacks, aided by insufficient permissioning defenses, continue to proliferate and become more aggressive.

In enterprise cybersecurity solutions, there is a concept known as Zero Trust. Most users are presumably aware that without Zero Trust architecture, they will eventually be subjected to a successful breach and be forced to pay ransoms to recover their data. Identity is a key component of Zero Trust.

I certainly do not claim to be able to evaluate the various identity offerings aimed at supporting a Zero Trust architecture. I’ll mention that Okta  stock forecastis ranked first in this space by Forrester Research, with the highest possible ratings in 14 of 18 evaluation categories.

okta stock forecast, Being the leading vendor in terms of market share and product competence in a strong field is often a recipe for excellent growth, and the data released this quarter indicate that the company continues to gain share in a rapidly developing market.

Okta  stock forecast has been perceived as a work-from-home brand, and the recent up and down performance of the shares reflects the up and down expectations of many businesses for a return to in-office work.

According to one idea, some demand for identity management solutions has been pushed ahead as a result of the work-from-home paradigm, which has received a significant boost as a result of the pandemic’s impact.

I try to look at these paradigm shifts in the long term; in my opinion, the return to on-premise employment, as it happens, will result in a lot more hybrid workforce than previously existed, with some work done in the office and some done at home.

I don’t think it makes sense to label Okta as a work-from-home or reopening stock.

In March, the business announced the acquisition of Auth0, a company with a snappy name. This was not a cheap purchase – at least not in the traditional sense. Auth0’s recurring revenue was around $200 million, but it has been expanding at a rate of more than 50%.

The purchase price for Auth0 was $6.5 billion, making it Okta’s largest acquisition to date. The deal was valued in terms of Okta shares. The anticipated value was based on the current share price of Okta, which was $276.21. Okta issued approximately 23.5 million shares at that price, representing approximately 15.5 percent of the total shares now outstanding.

The acquisition of Auth0 theoretically contributed roughly $38 million to the previously reported revenues; the purchase accounting haircut was around $13 million, thus Auth0 revenues, as adjusted, represent for about 15.5 percent of the company’s adjusted revenues for the quarter just reported.

Buying Auth0 without reducing revenues per share is a really good deal, given the numerous sales and cost synergies that are still in the early stages.

Initially, the firm did not provide much assistance to investors during the conference call in which the deal was first mentioned, but which lacked transparency regarding its estimate of Auth0’s anticipated contribution.

That has now been corrected; it would be difficult for anyone to demand more numbers about Auth0’s contribution than those provided by Okta in this most recent conference call.

The market is expected to have a TAM of $25 billion, which is nearly the same as the TAM of the employee identity management space. According to the analysis I linked to above, the space is expected to grow at a CAGR of 17% over the next few years.

 

On the other hand, the CEO mentioned a total TAM for the sector of $80 billion, which is significantly larger than what I have seen in the research that I have access to. When the deal was announced in March, several investors were suspicious about the $6.5 billion valuation, and Okta stock forecast shares plummeted.

Last summer, Auth0 raised $1.9 billion in capital at a valuation of $1.9 billion. Surprisingly, Salesforce Ventures lead the investment round with that valuation. One of the reasons Okta purchased Auth0 was defensive; clearly, Okta worried the possible consequence of Salesforce adopting Auth0 into its stack, which could easily have happened given Salesforce’s shareholding in the company.

 

Why is Okta winning the fight for identity management?

Okta’s competitors come in a variety of shapes and sizes. This is a market space with a TAM of $60 billion-$80 billion, depending on whose analyst prediction is used. Here’s a link to a list of some of the major players in the space.

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Not all of the participants listed in the link are actually Okta competitors. Almost all large IT suppliers claim to provide some type of identity management capabilities, but corporate consumers want features that not all so-called identity management vendors provide.

Ping Identity, a main competitor of Okta, will be familiar to many readers. I’ve included a link to a third-party study of the competition.

Ping’s operational performance has been, to put it mildly, disappointing. Nonetheless, the company’s latest reported quarter earnings were strong, and the stock has risen.

Ping’s fundamental difficulty is that Cloud ARR accounts for only 20% of overall ARR, and while it is rapidly expanding, it has stopped the company, with the exception of the most recent quarter, from attaining the kind of growth that most tech investors seek. On a year-to-date basis, the stock is still down slightly more than 10%.

According to the analyst research I linked, Okta is regarded to be in the lead when it comes to identity management capabilities for cloud-based apps.

As the world moves toward the cloud, this expert discusses how many IT businesses are looking for a new cloud-based identity supplier, which most commonly turns out to be Okta. According to the analysis, many consumers desire to buy solutions from a firm that offers a comprehensive capability that combines identity, user, and access management with single sign-on capabilities. Another trend in Okta’s favor.

Okta  stock forecast now offers much of what made SailPoint distinctive in its space, including a focus on governance. Okta  stock forecast has a considerably broader set of comprehensive capabilities, and with its new IGA features, it appears to offer more functionality overall than SailPoint.

Although services in the CIAM field differ from those in the workforce identity management space, the most of the competitors are the same. Here is a link to one competitor’s list of competitors; here is another, more extensive list. One thing to keep in mind is that the majority of stack providers provide some form of solution, which is effectively related to their own set of solutions.

 

I’ve included a link to a comparison of AzureAD identity management to Okta’s offerings. Okta  stock forecastis frequently used in conjunction with AzureAD.

At this moment, all cloud providers provide some form of identity management solution, which is obviously linked to their own cloud offerings. Users turn to Okta for more functionality and a vendor-agnostic solution.

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I feel that the company’s potential to maintain share gains is a crucial component of the Okta purchase recommendation case. Okta wins a disproportionate amount of competitor bake-offs as users migrate from on-premises to cloud workloads and reassess their vendors.

This, I believe, is at least as much a result of Okta’s holistic vision and holistic range of offerings. However, the results from the previous quarter, both in workforce and CIAM, show that Okta’s product approach and go-to-market plan are working.

 

Okta’s business concept and conclusion

Before delving into the figures, I believe it is important to note two points. One of these is that Okta’s  current reported earnings include considerable effects from the company’s recent merger, which may be deceptive to readers and potential investors. For the most recent fiscal year, the company achieved full-year non-GAAP profitability.

Okta’s business is subject to seasonality; typically, Q4 has the highest degree of profitability and Q1 has the lowest. Okta was marginally profitable in Q4-2021 before the merger, with a modest deficit in Q1-2022.

The loss in Q2 is significantly bigger than any reader/investor should predict, taking into account both increased costs related with the Auth0 merger and the absence of $13 million in revenues.

Furthermore, for the company, I use 153 million outstanding shares to represent the impact of the additional shares issued in connection with the Auth0 transaction, but not any prospective impact from implied shares outstanding.

 

The estimate I used is based only on the outstanding shares provided by Okta in its most recent quarterly report, however I tend to round up somewhat to account for more option shares that will be capitalized over the duration of my projections.

 

Some corporations now report something termed “implied shares outstanding,” which reflects the conversion of convertible securities. When a corporation reports non-GAAP profits, this caption is commonly used.

 

When Okta stock forecast announced a profit for the fourth quarter and the full fiscal year 2021, the weighted average share count grew by more than 13 million shares.

To fully compare different companies, I must eliminate the additional outstanding shares whose presence is suggested but not stated. In a value analysis, I aim to apply the most consistent method available.

The problem is moot because Okta is unlikely to produce a non-GAAP profit this year; despite the reported 1st Call Consensus, I believe the company will make a profit in fiscal 2023 due to both revenue and cost savings inherent in the Auth0 merger, as well as good business trends.

This company’s recent merger with Auth0, its main competitor for cloud-based CIAM solutions, is a marriage that, if not made in heaven, has several highly beneficial results for Okta. Obviously,

Eating one’s main competitor will offer Okta with additional pricing power, which will eventually convert into higher gross margins.

Furthermore, significant okta stock forecast cost synergies will almost certainly be obtained, most likely at a faster rate than is reflected in current consensus projections. At least as important as the “hard” benefits is the opportunity to merge both the Auth0 selling motion solutions, which are developer-first, into Okta’s go-to-market strategy.

Many of today’s most successful software businesses, including industry titans like Datadog (DDOG) and Twillio,are businesses that have found success in sales by focusing on developers. Of course, no one go-to-market strategy is certain to be successful.

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But I believe that combining Auth0’s developer-first paradigm with  okta stock forecast successful end-user/enterprise marketing will add strength to strength.

 

Trust you found our article on OKTA Stock Forecast 2025: Is OKTA Stock A Good Buy? helpful. Follow our website for more interesting articles.

 

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