Summary of Key Points from the Conference Call Industry Overview - The focus is on the "Laggards" trade, where stocks that underperformed in the previous year tend to outperform in the first quarter of the following year. This trend has been observed in 14 out of 23 years since 2002, with a notable outperformance of +1.6% in Q1 2025 compared to the S&P 500 [1][4]. Core Insights - **Performance of Laggards**: In 2025, laggards are down 19% on an absolute basis and -36% relative to the S&P 500, which is worse than the long-term averages of -17% and -28%, respectively [9][11]. - **Sector Composition**: Information Technology and Industrials represent the largest shares of laggards at approximately 15% each. There has been a shift away from Healthcare (12% in 2025 vs. 20% in 2024) and an increase in Financials (12% vs. 4%) [10][12]. - **Historical Context**: The average first-quarter relative return of prior-year laggards has been +50 basis points compared to the S&P 500, with a hit rate of 51% for laggards outperforming in the subsequent first quarter [4][7]. Investment Opportunities - **Differentiated Buys**: Analysts have identified stocks with out-of-consensus Buy ratings, including FTNT, POOL, and HRL, which are expected to perform well [3]. - **Free Cash Flow Stories**: Companies like PINS, VNOM, and FBIN are highlighted for their expanding free cash flow margins and attractive yields [3][26]. - **Growth at Reasonable Prices**: Stocks such as ARES, WK, and ELF are expected to achieve over 10% sales growth from 2025 to 2027 with low Price-Earnings-Growth ratios [3][28]. - **Financial Returns**: Companies like ADBE, IRM, and RRX have a track record of generating financial returns exceeding their cost of capital [3][31]. - **Rebounding Margins**: Companies such as STZ, VERX, and WERN are expected to see a rebound in operating margins after a challenging 2025 [3]. Additional Insights - **Laggard Characteristics**: The current laggards exhibit low financial returns and high growth, with a notable increase in inexpensive valuations and high balance sheet leverage compared to previous years [10][14]. - **Sector Performance**: Laggards in Materials, Consumer Discretionary, and Healthcare have underperformed the market the most year-to-date, while those in Energy and Industrials have lagged the least [10][12]. - **Analyst Ratings**: A list of laggards with differentiated bullish views includes companies like WERN, WOOF, and TDOC, which have significant upside potential compared to market expectations [21]. This summary encapsulates the key points from the conference call, focusing on the performance of laggards, investment opportunities, and sector dynamics.

Investment 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].