Okta(US:OKTA) Goldman Sachs·2025-05-30 02:35Investment Rating - The report maintains a Buy rating for Okta, indicating confidence in the company's potential for growth stabilization and execution on its go-to-market strategy [3][17]. Core Insights - Okta's 1QFY revenue was 1% above expectations, with a cRPO (current Remaining Performance Obligations) 2% above and EBIT margin approximately 200 basis points above [1]. - The company is experiencing a sequential decline in subscription revenue growth and cRPO, which has raised concerns about future performance [1][15]. - Despite these challenges, Okta is well-positioned to benefit from the increasing adoption of AI technologies among its customers, with initiatives like Auth for GenAI expected to enhance its offerings [3][15]. Financial Performance - For FY26, revenue guidance remains unchanged at $2,859 million, with EBIT margin guidance also maintained [1][17]. - The company reported a net revenue retention (NRR) rate of 106%, slightly down from 107% in the previous quarter, and is expected to remain within the 106-108% range for the remainder of FY26 [1][15]. - cRPO bookings grew 9% year-over-year, but this represents a 23% quarter-over-quarter decline, indicating volatility in forward subscription revenue [15]. Valuation Metrics - The adjusted 12-month price target for Okta is set at $137, based on a valuation of 25 times EV/uFCF [17]. - Key financial metrics include projected revenue growth rates of 15.3% for FY25, 9.5% for FY26, and 10.5% for FY27 [9]. - The report highlights a free cash flow yield of 4.9% for FY25, decreasing to 3.4% by FY26 [9]. Market Context - Okta's market capitalization is approximately $22.9 billion, with an enterprise value of $20.5 billion [4]. - The company is positioned within the Americas Emerging Software sector, ranking 3rd in M&A activity [4].