Okta Shows Clear Progress, But This Analyst Remains On The Sidelines Citing No Clear Catalyst For Improved Valuation

Needham analyst Alex Henderson maintained a Hold rating on Okta, Inc OKTA. Henderson hosted Okta CFO Brett Tighe at Needham Growth Conference.
Okta has battled multiple headwinds, including sales attrition, Auth0 integration issues, management turnover, and product delays, but the company now feels that progress on improvements is noteworthy.
The Auth0 acquisition made sense, bringing a higher growth asset and a robust coding culture into the more enterprise-oriented Okta platform.
Okta noted it had been pleasantly surprised by the rapid improvement in FY3Q and continuing in FY4Q.
Attrition has improved dramatically, and Customer identity and access management (CIAM) pipeline execution has been enhanced as macro worsened toward the end of FY3Q.
Guidance for 16%-17% growth in FY24 conservatively assumes these macro headwinds worsen while sales productivity will likely remain low.
Even as Okta is moderating its overall spending, it's continuing to drive investments in the channel.
The analyst's field checks with VARs have consistently suggested a flattening of the Workforce Identity market and noted some saturation.
Substantial progress around Identity and Administration Governance (IGA) adoption with Privileged Access Management (PAM) will likely enter the fold in 1HCY23, presenting promising product catalysts.
However, Okta notes that the macro pressure is most intense in SMBs. Okta's new products initially target that arena as they are not fully featured enough for the large Enterprise.
Okta also revealed plans to name an interim CRO over the coming weeks following Steve Rowland's departure.
The analyst thinks the stock has likely based and the guide for FY24 looks conservative, but also thinks there is no clear catalyst for improved valuation as he awaits an update on long-term growth targets.
Accordingly, the analyst remains on the sidelines and reiterates Hold rating.
Price Action: OKTA shares traded higher by 2.19% at $67.29 on the last check Friday.

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