Is Okta stock worth its current valuation?
The shares of Okta, Inc. (NASDAQ: OKTA) -- an identity and access management company based in San Francisco -- have shed over 20% in the last 12 months, and over 10% this year already. While the stock managed to bounce off its Jan. 10 annual low of $184.02, familiar pressure at the 40-day moving average quickly rejected the rally, pushing OKTA back toward this low.
In fact, the equity is falling even further today, last seen down 2.2% at $199.94, thanks to a bear note from Truist Securities. The analyst cut its price target to $270 from $300. The 12-month consensus price target of $281.64 is still a lofty 40.6% premium to current levels, which could mean more price-target cuts on the horizon. Downgrades could be imminent too, as 16 of the 19 in coverage call it a "buy" or better.
From a fundamental point of view, it is difficult to see Okta stock as much more than a speculative play for investors at the moment. The security already has a massive market capitalization of $31.1 billion, with an extremely high price-sales ratio of 27.55 and no earnings have been posted yet.
Nonetheless, the cybersecurity company has a decent balance sheet with $2.48 billion in cash and $2.02 billion in total debt. In addition, Okta has managed to increase its revenues by more than 340% since fiscal 2018 and is estimated to grow another 37.3% next year. However, investors may still better suited waiting for significant weakness or for OKTA’s revenue output to rise considerably in order for its valuation to look more appealing.