Okta Stock Gets a Buy Rating Ahead of Earnings. Why It’s Being Upgraded Now.

Truist Securities upgraded the cybersecurity stock to Buy from Hold in a research note Monday. (Dreamstime)

Okta got a boost from a Wall Street analyst as investors prepare for the identity-security company’s second-quarter earnings.

Junaid Siddiqui of Truist Securities upgraded shares to Buy from Hold and lifted his price target to $125 from $100 in a research note on Monday. Shareholders should expect solid quarterly results, Siddiqui said, and Okta is well-positioned in a market ripe for consolidation.

Okta stock ticked up 0.4% to $92.44 on Monday. Shares have climbed 17% this year but remain in the red over the past 12 months. The company reports quarterly earnings after the market closes on Tuesday.

Okta already has a foothold in many organizations as the leading single sign-on and multifactor authentication vendor. As these customers look to consolidate identity security onto a single platform, Okta stands to benefit, Truist said.

“We expect there will be increasing consolidation in identity security, driven by identity’s role as the new [security] perimeter,” Siddiqui wrote. “We would expect this consolidation to play out over years rather than months, particularly for large enterprises.”

Okta isn’t the only company that can consolidate. Late last month, Palo Alto Networks announced a $25 billion deal to acquire CyberArk Software as part of its own single-vendor strategy. But Okta has 20,000 customers to which it can cross-sell other offerings, Siddiqui noted, compared with 10,000 customers at CyberArk and 3,000 customers at SailPoint , another competitor.

The company is also in a prime position in the growing machine-identity field, which refers to securing keys, certificates, automation bots, and other so-called machine identities within organizations. These identities have proliferated as more companies have turned to generative and agentic artificial intelligence, Siddiqui said, creating an estimated $25 billion addressable market.

“We believe the market for machine identities could be much larger than the market for human identities,” the Truist analyst wrote.

Okta could benefit even if it claims a relatively small slice of the pie, Truist said. The firm expects machine-identity solutions to drive revenue growth at Okta as the market expands over the next couple of years.

This week, though, the spotlight is on shorter-term results. Okta shares have swung by double-digit percentages after nine of the company’s last 12 earnings prints, according to FactSet. That includes a steep decline in May when the company beat earnings estimates but issued a cautious fiscal-year outlook.

Shareholders will hope for a little more optimism on Tuesday.

Write to Nate Wolf at nate.wolf@barrons.com