Okta Inc (NASDAQ: OKTA) is trading at its year-to-date low on Monday – a valuation that’s “too compelling to ignore”, as per a Guggenheim analyst.
Okta stock upgraded to ‘buy’
John DiFucci upgraded the identity management company this morning to “buy” and announced a price objective of $65 that represents about a 45% upside on its previous close.
Okta is currently trading at 3.6 times the EV-to-NTM recurring revenue. In comparison, its rivals – Ping Identity and ForgeRock, the analyst wrote, were acquired at 8.2 times and 8.9 times, respectively.
While our upgrade isn’t necessarily based on potential of a similar outcome for Okta (although we recognise the possibility), we see current levels offering asymmetrical risk-reward with little downside and significant upside potential.
Down 85% versus its all-time high in February 2021, Okta stock is trading below its intrinsic value, he added.
Headwinds are already priced in
Okta is expected to report its Q3 results on December 7th. Consensus is for its per-share loss to remain unchanged sequentially at $1.34 (read more) and up meaningfully from last year’s $1.08.
In other words, the Nasdaq-listed firm is expected to remain significantly in loss – in line with several other cloud stocks that have already reported disappointing third quarters on macro headwinds.
Still, the Guggenheim analyst continues to see a massive opportunity for Okta Inc, over the long term, in its core identity and access management space. He also noted:
Okta is more than pricing in issues surrounding salesforce attrition, product delays, C-suite turnover, and negative headlines concerning security incidents.
Okta is scheduled for an Investor Day next week.
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