Overview
Jefferies, via analyst Joseph Gallo, is singling out identity software as a favored sub-sector within cybersecurity as the market moves into the second half of the year. The firm argues identity-focused vendors stand to be among the earliest beneficiaries of artificial intelligence adoption because an increase in non-human identities will drive demand for stronger identity protection and governance.
Sector backdrop
Jefferies points to a noticeable market recovery in cybersecurity, noting that the median cybersecurity stock has gained 55% since April 10th. Against that recovery, the firm remains focused on identity software providers and companies that can consolidate platform capabilities in the space.
Top picks and rationale
Jefferies lays out its preferred ways to play the identity theme with company-specific rationale and updated valuations.
- Okta Inc. - Jefferies designates Okta as its top pick for exposure to identity software and has increased its price target to $140 from $120. The firm cites evidence of underlying operational strength, including a reacceleration in net revenue retention to 107%. Improved pipeline visibility and go-to-market changes - such as stronger channel relationships and higher representative productivity - are described as creating what the analyst terms a "year of harvesting." Jefferies also highlights that current consensus expectations appear beatable and that Okta's guidance for the second quarter points to a second straight quarter of acceleration in calculated remaining performance obligation. These developments are occurring alongside limited expectations for significant agentic impacts in fiscal year 2027. The new price target reflects an implied 6.8 times enterprise value to calendar year 2027 estimated revenue.
- SailPoint Technologies Holdings Inc. - Jefferies retains a buy rating on SailPoint and raises its price target to $23 from $20. The firm views SailPoint as the governance layer capable of securing both machine and human identities and sees indicators of an inflection in the second half of 2026 or early 2027. Jefferies expects that new products, migrations to software-as-a-service and the advent of agentic AI will underpin more than 20% year-over-year growth in annual recurring revenue for several years. The updated valuation implies roughly 10 times enterprise value to next twelve months revenue, assuming 18% year-over-year revenue growth.
- Palo Alto Networks Inc. - Jefferies keeps a buy recommendation with a $335 price target on Palo Alto Networks. The firm considers Palo Alto to possess the most comprehensive cybersecurity platform following its acquisitions of CyberArk and Chronosphere, and reports that integration progress is tracking three to six months ahead of plan. Channel survey work cited by Jefferies indicates resellers consider CyberArk the agentic winner. The analyst believes Palo Alto is well positioned to capture benefits from AI proliferation and identity-related demand, with annual recurring revenue expanding in the mid-to-high 20% range.
- CrowdStrike Holdings Inc. - Jefferies rates CrowdStrike as a buy and sets a $760 price target, viewing the company as another route to participate in the identity trend through its Next-Gen Identity business. As of the fourth quarter of fiscal 2026, Jefferies notes that CrowdStrike's identity security business produced $520 million in annual recurring revenue, up 34% year-over-year.
Analyst outlook
Overall, Jefferies continues to favor identity software providers and platform consolidators within cybersecurity, anticipating that investor optimism will grow as signs of AI-driven identity demand become more apparent in the second half of 2026. The firm highlights improving commercial metrics and integration progress at several large vendors as evidence supporting its recommendations.