Analysts at Bank of America began coverage of Okta (NASDAQ: OKTA) with a rating of underperform and a price target of $64 per share, indicating a downside risk of approximately 16%.
Due to Microsoft’s (NASDAQ: MSFT) competition, pricing erosion, channel conflicts, and other structural problems, analysts foresee a heightened chance of sluggish growth and little margin upside.
“The Street thinks sales will go up 18% in the next two years. We think this is too optimistic and think sales will go up 16% instead.”
“The consensus on Wall Street is for Okta’s CIAM business to grow at a CAGR of 28% over the next four years, but we believe this estimate is too ambitious and have modelled a more modest growth rate of 23%,” they wrote in an introductory note.
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In this manner, the analyst’s forecasts for FY24 and FY25 are 2% and 11% below the consensus, respectively.
The analysts continued, “We expect the stock to underperform, even after its 60% loss over the past year.”
In pre-market trading, Okta shares are down about 3 percent.