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Okta Stock Soars: Is It Still a Buy?
5 Sep
Summary
- Okta stock has more than doubled year to date.
- DCF estimate suggests Okta is fairly valued near $175.
- P/E multiple is significantly higher than industry averages.
Okta's stock has experienced a dramatic increase, more than doubling its value year to date. This significant gain prompts a closer examination of its current valuation. Analysts suggest that while Okta appears fairly valued based on its intrinsic value estimated through a Discounted Cash Flow (DCF) model, its market multiples indicate a richer valuation.
The DCF model, which projects free cash flows, estimates Okta's intrinsic value at approximately $175 per share. This figure aligns closely with the current share price, implying only a minor discount. This valuation largely reflects Okta's recent performance, including a Q2 earnings beat and growth in AI security, which have pushed its price to a four-year high.
However, when viewed through the lens of earnings multiples, Okta appears expensive. Its current P/E ratio stands at 100.8x, considerably higher than the IT industry average of 20.7x and its peer average of 38.8x. This disparity raises questions about whether the stock's recent appreciation leaves sufficient room for future upside relative to its intrinsic value.
