Analysts have expressed skepticism about Okta Inc’s strategic focus and deal trajectory following a recent security breach. The company’s shares saw a continued decline during Thursday’s session.
Wells Fargo analyst Andrew Nowinski stated that Okta should prioritize gross revenue retention, net revenue retention, and accelerating top-line growth in order to assure investors that the breaches are in the past. Nowinski believes that now is not the time for Okta to drive operating-margin expansion.
During Wednesday morning’s earnings call, Okta’s management emphasized profitable growth, but this came shortly after the company revealed that the security breach was more severe than initially believed. As a result, Okta’s shares fell 5.3% on Thursday, following a 2.5% decline the day before.
KeyBanc Capital Markets analyst Eric Heath downgraded the stock due to concerns about potential risks such as deal pushouts, churn, and new business. Heath stated that it may take a couple of quarters to fully assess the impact of the breach. However, he still views identity as a top priority within security and sees Okta as a potential long-term consolidator.
TD Cowen analyst Shaul Eyal also downgraded Okta’s stock, attributing it to the company’s outlook reflecting a top-line deceleration in fiscal year 2025. Eyal believes that recent high-profile breaches involving Okta’s solutions have influenced this outlook. He now rates the stock at market perform and has lowered his price target to $74 from $100.
Overall, analysts are questioning Okta’s strategic direction and growth prospects after the security breach. Investors are closely watching how the company handles these challenges in the coming quarters.
