Index removals put fresh attention on Okta stock

Okta (OKTA) has been dropped from several Russell growth benchmarks, including the Russell Midcap Growth, Russell 1000 Growth and Russell 3000 Growth indices. This change can reshape how some funds trade the stock.

Despite the index removals, Okta’s recent share price performance has been strong, with a 1-day share price return of 5.66%, a 7-day return of 13.26% and a 90-day return of 66.83%. The 1-year total shareholder return sits at 31.35%, pointing to momentum that has been building rather than fading.

If you are reassessing Okta after these index changes, it can be useful to see what else is moving in related areas of the market, starting with 52 AI infrastructure stocks

With Okta trading at $131.31, slightly above the average analyst price target and with only a modest intrinsic discount indicated, the key question is whether the recent strength leaves any upside, or if the market is already reflecting expectations for future growth.

Most Popular Narrative: 13% Undervalued

Okta’s last close at $131.31 sits below a narrative fair value of $151. This frames the current strength as still leaving some room according to this view.

For a long time, the market criticized Todd McKinnon because Okta, despite having an excellent technical solution, failed to become profitable. With the Q1 FY2027 results, that discussion appears to be over.

The question is no longer whether Okta can become profitable. The new question is whether Todd can unlock the next market: Identity and Access Management (IAM) for AI Agents.

Want to see what sits behind that $151 fair value for Okta? According to Tokyo, it hinges on a specific blend of revenue growth, margin expansion and a future earnings multiple that assumes the business matures into a higher profitability profile while still supporting solid top line progress. The tension is how ambitious those inputs are and how much of that future is already reflected in today’s $131.31 share price.

Result: Fair Value of $151 (UNDERVALUED)

However, this Okta narrative could be knocked off course if profitability progress stalls or if demand for AI agent identity products develops more slowly than hoped.

Another view on Okta’s valuation

The user narrative argues that Okta is 13% undervalued at $131.31 based on a fair value of $151, but the earnings multiple paints a different picture. Okta trades on a P/E of 92.4x, compared with 16.4x for the wider US IT industry and 36.1x for peers, while the fair ratio is 37.3x. That gap suggests investors are paying a high premium for Okta today, so the real question is whether you think the business can justify staying this far above the pack.

Next Steps

If the mix of optimism and concern around Okta feels finely balanced, consider acting while the information is fresh and weigh the trade off yourself with 3 key rewards and 2 important warning signs

Looking for more ideas beyond Okta?

Okta might be front of mind today, but you do not want to miss other opportunities that fit different goals, risk levels and income needs.

• Spot potential mispricings early and shortlist companies that may offer better value by running a quick check with the 42 high quality undervalued stocks.
• Strengthen the defensive side of your portfolio by focusing on companies screened for sturdier finances using the solid balance sheet and fundamentals stocks screener (48 results).
• Put your cash to work with income ideas by scanning for higher yielding opportunities through the 9 dividend fortresses.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.