Raymond James analyst Adam Tindle upgraded Okta, Inc (NASDAQ: OKTA) from Market Perform to Outperform with a price target of $85.00.

The analyst comments: "Key thesis tenants: 1. The tactical call: OKTA has gone from $200 in FY23 to $60s today as NRR (key growth metric) decelerated from >120% to ~106% due to downsized renewals from COVID cohorts that overprovisioned. We see this headwind subsiding as average contract duration is just under three years (i.e., renewals have all rolled through), and our analysis of various metrics (cRPO/RPO/Subs) suggests a forward waterfall that should result in upside to growth. We would not be surprised to see revenue growth >10% for FY27 (guide 8.9%).

2. The structural call: Our recent conversations with channel partners suggest that AI is beginning to move from the experimentation to the production phase in Enterprise use cases, and agents that have previously been using human identity security will now need their own identity security. We see the potential for a significant unit TAM increase for Okta’s core market due to Agents in the workforce. We include a sensitivity analysis that balances reduction in human headcount with addition of agents alongside ARPU assumptions that result in net tailwinds to Okta that could become material over time. Partners are reinvigorating investment in identity security for the first time in years based on our checks, and this tends to be a precursor for future growth acceleration.

3. Favorable risk/reward: At present, OKTA trades at ~3x EV/Revenue and a low double-digit multiple of FCF which is more consistent with single digit growth businesses. Stabilizing core metrics alongside incremental AI monetization could push growth into double-digit territory in a bull case, and closer to comps like MDB and FROG that trade at 6x+ EV/Revenue or essentially double OKTA’s current multiple (~$120). If growth continues to decelerate, the low/mid-single digit growth group (think RNG, BLKB) generally trades around 2x EV/Revenue (~$50). In other words, we see a near 3:1 up/down scenario as a favorable."

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Shares of Okta, Inc closed at $67.35 yesterday.