Should You Sell Your Okta Stock After It Tripled In Six Months?
Okta (OKTA) stock has returned 225% over the past six months, far outpacing the S&P 500’s 14.4% return. Investors holding the shares are sitting on a large gain, raising the question of whether to hold or take profits. The company sells identity software to more than 20,000 customers, and recent buyers may be betting on its new products designed for AI agents. So how much are you paying today for each dollar Okta earns?
Okta’s Thin Margin Helps Explain Its 137x P/E
Investors are currently paying 136.7 times Okta’s earnings over the past twelve months, compared with 21.9 times for the S&P 500. That is the company’s price-to-earnings ratio. In practical terms, each dollar Okta earns costs about six times what a dollar of the broader index’s profit costs.
One reason for that high valuation is Okta’s comparatively thin profit margin. The company kept 9.6% of its sales as net profit over the past twelve months, falling short of the 13.3% for the S&P 500. This multiple would come down if Okta’s profit grew faster than its share price.
Okta Has Outgrown The S&P 500 Over Three Years
Okta grew revenue 10.6% from a year earlier in its latest quarter. Over the past three years, the company expanded sales by 14.2% a year on average, easily beating the 5.9% growth rate of the S&P 500. While Okta has expanded faster than the broader market over that stretch, the pace may fall short of what investors expect given the stock’s current price.
During the fiscal Q2 2027 call in August, management raised its outlook and now expects revenue growth of 10% to 11% for fiscal 2027. That guidance includes about a 1-point headwind from shifting more professional services work to partners. Management also called the period a record for bookings outside a fourth quarter. For fiscal Q3 2027, the company guided to revenue growth of 10%.
Are Okta’s AI Agent Products Selling Yet?
Okta’s AI agent products are finding buyers, but not yet at a volume that alters the company’s financial results. Okta for AI Agents secures the automated agents that customers deploy. While this technology may be exactly what recent buyers of the stock are paying for, the immediate financial impact remains muted. Okta won dozens of AI deals in fiscal Q2 2027, including several worth more than $1 million each. However, management noted on the earnings call that the product is still too small to show up in the numbers.
Management does not expect AI to be material in fiscal 2027. They did flag a real possibility for fiscal 2028 and beyond if current trends continue. The company boasts a larger pipeline of AI deals than it did a quarter earlier, but management cautioned that they cannot yet tell how fast those deals will convert. Okta’s wider set of new products is already gaining traction, however. Led by Okta Identity Governance, these offerings made up about 30% of bookings in fiscal Q2 2027.
Okta showcased more AI agent security features at its Oktane conference in September. Management has said AI will not be material to fiscal 2027 revenue, so the fiscal Q3 2027 report is more likely to show progress through bookings and the AI deal pipeline than through overall revenue growth.
How To Act On OKTA?
Now you know OKTA better. And that’s our purpose: to make you informed before you invest your money. However, making a bet on a single stock carries its own risks.
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