Okta Inc. reported positive earnings in Q4 FY2025, and the stock has since surged to over $100. This is the first positive news in a while, and the stock was down nearly 20% before the news broke and pulled the stock up. OKTA stock is still down considerably from its post-COVID boom prices, so should you buy?
Okta reported $682 million in Q4 FY2025 revenue, up 13% year-over-year. Free cash flow surged to $284 million and now is 42% of revenue. Analysts have already started hiking their price targets as Okta projects continued growth for FY2026.
Moreover, the non-GAAP operating margin improved to 25%, up from 21% in the prior year. Remaining performance obligations also grew by 25% to $4.215 billion.
EPS of $0.78 beat estimates by $0.04, and revenue beat estimates by $12.9 million.
Wall Street is very optimistic as analysts are upping their price targets fast. KeyBanc raised its price target to $135, and Citi raised it to $110. Several other analysts have raised their price targets.
They cite Okta’s hold on the identity market and its expanding partnerships, like the one with AWS, which caused a significant revenue boost. Over 1,300 customers now use Okta’s Identity Governance suite.
Okta has delivered some solid results, but it’s worth looking at the valuation as well. The stock has been rejected at the $100 level several times, which could also happen this time.
This is because even with those growth rates, Okta remains quite expensive. You’re paying over 30 times forward earnings and about 5.5 times forward sales for around 8-10% top and bottom line growth. There’s definitely room for upside from here, but not much.
The current consensus price target of $105.67 implies 5.67% upside potential, so buying more OKTA stock may not be worth it.
