UBS says Okta ‘s “compelling mix of growth and improving profitability” is currently underappreciated by investors. The bank initiated coverage on Okta with a buy rating and a price target of $100, which implies 35% upside from Friday’s closing price. Shares of Okta are up 8.7% year to date, slightly outperforming the S & P 500’s 7.7% gain. However, the workforce identity software company’s stock has dropped more than 48% over the past 12 months. OKTA 1Y mountain Okta stock “While Okta stumbled in CY22, 10+ conversations over the past 2 quarters suggest execution is improving and platform direction is resonating,” analyst Roger Boyd wrote in a Sunday note. “We see Okta as well-positioned to benefit from continued identity tailwinds, a view supported by checks across the customer and partner community highlighting strong identity spending Intentions [and] detailed [total addressable market] analysis,” Boyd added. UBS thinks Okta’s margin expansion opportunity is not yet fully appreciated by investors. It estimates Okta’s operating margins will grow by more than 20% operating margins by 2027, the bank estimates. “Combined with improving execution we expect Okta will be able to reaccelerate revenue growth in CY24 off a CY23 dip (we’re modeling 17%/18% in CY23/CY24), while also driving material margin expansion beyond the [reduction-in-force]-driven improvement in CY23,” Boyd said. The analyst also said there are significant install-base opportunities for Okta in the future. UBS estimates there is an $80 billion market opportunity in store for the company. “Our Buy Rating and constructive view on Okta is predicated on the company’s ability to accelerate growth in CY24 while continuing to deliver meaningful margin expansion. We expect a broadening product portfolio can meet a concerted customer-driven push towards consolidation, which should support larger engagements for Okta and ultimately better sales efficiency,” said Boyd. “Identity, of both the workforce and customers, remains a significant focus area for organizations from both a productivity and security standpoint, and we expect Okta’s growing platform and product roadmap [to] broadly match customer demands.” —CNBC’s Michael Bloom contributed to this report.