Okta Inc. has “generally happy customers” even as cloud software vendors get squeezed in 2023 with capital-spending budgets under scrutiny, an analyst found in a survey that led him to upgrade the identity-management company’s stock and increase his price target by 33%.

Stifel analyst Adam Borg upgraded Okta to a buy from a hold and raised his price target to $90 from $60 late Sunday, after determining the risk/reward profile on the stock was positive even as businesses scale back on spending on a recession footing.

The analyst said after surveying 37 current customers — 80% of which spend more than $100,000 a year, and 43% of which are companies that have $1 billion or more in revenue a year — he found that overall “results reveal generally happy customers” who support Okta’s and are interested in the company’s broader Identity Governance and Administration, or IGA, and Privileged Access Management, or PAM, products.

“To be clear, this call may be early as we think Okta still has a lot of work to do,” Borg said, as the market “remains highly competitive, Okta’s C4Q22 VAR checks were disappointing, and investor sentiment on Okta remains more mixed given CY22 breaches and uneven results.”

From November: Okta CEO promises profit for all of next year — ‘The problem was never that we didn’t have talented sales people’

The analyst, however, believes that at current valuations the stock has a positive setup and risk/reward as the company “steadies execution against already de risked CY23 top-line guidance and delivers significant operating/[free cash flow] margin improvements in coming years.”

okta okta,
-3.04%
shares were last down about 2% in Monday trading, while the S&P 500 SPX,
-1.30%
was down1% and the Nasdaq Composite Index COMP,
-1.96%
was off 1.5%. Over the past three months, however, Okta shares are up 23%, while the S&P 500 and the Nasdaq are up about 3%.

Shares of Okta surged more than 25% on Dec. 1 after Wall Street gave its blessing to the company’s forecast trajectory.

In-depth: Okta CEO says ‘short-term challenges’ resulted in workers leaving a higher rate

Okta is expected to report its fourth-quarter earnings in early March. For the fourth quarter, Okta forecast adjusted earnings of 9 cents to 10 cents a share on revenue of $488 million to $490 million. 9 cents a share and $489.7 million.

In 2022, the company rallied back from initial difficulties as it struggled in focusing on its sales strategy between its sales force and sales representatives acquired in the May 2021 acquisition of identity-platform Auth0 (pronounced “Auth Zero”).

Read: Cloud software is a ‘fight for a knife in the mud,’ and Wall Street is souring on the one sector that was winning

Of the 38 analysts surveyed by FactSet, 24 have buy-grade ratings, 12 have hold ratings, and two have sell ratings, and an average price target of $77.04, according to FactSet data.

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