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Okta: Strong Growth And Abundant Potential

May 04, 2020 9:41 AM ETOkta, Inc. (OKTA)IBM, MSFT13 Comments


  • Okta is a market leader in the much promising sector of identity services.
  • The company was already growing at full speed before the coronavirus pandemic, and it should benefit from accelerating adoption during this period.
  • Major economic and technological trends provide powerful tailwinds for the business in the years ahead.
  • The stock is not too cheap at all, but it is still fairly valued if management keeps executing well.
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Okta (NASDAQ:OKTA) is a high-growth leader in identity services, an area with tremendously promising opportunities for growth. The business was already producing outstanding performance before the coronavirus pandemic appeared on the scenario, and a globally distributed workforce in times of shelter at home policies all over the world is driving accelerating adoption for identity services.

Okta stock is not cheap at all at current prices, but the business is strong enough to grow into its valuation over the next several years.

An Outstanding Growth Business

The company provides identity solutions for the workforce and customers. Workforce identity is the largest and most established segment, and it guarantees that the right employees and contractors will get access to the right networks and data in due time. Customer identity is a relatively new growth area for the company, and Okta is focused on both identity security and providing a seamless experience to the end-user in this business.

Source: Okta

Okta is benefiting from major growth tailwinds based on multiple drivers.

  • Due to the rapid growth of cloud and hybrid IT, identity has become increasingly complex as organizations move to the cloud.
  • The global trend toward digital transformation means that every company is now a technology company, and businesses of all kinds need help at implementing identity solutions that can meet their specific requirements.
  • Cybersecurity is a major concern nowadays. According to management, more than 70% of hacking-related breaches are caused by stolen credentials, and identity protection is of paramount importance.

When considering the size of the total addressable market, the company believes that it could be as high as $55 billion. Okta is expected to make $771 million in revenue during the fiscal year 2021, so the company is barely scratching the surface in comparison to its long-term growth opportunities.

Source: Okta

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Performance as of May 4, 2020

This article was written by

Andres Cardenal, CFA profile picture
Andrés Cardenal, CFA. Economist, financial analyst, columnist. Naturally flavored.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in OKTA over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (13)

fredruffy profile picture
I don't see Cyberark in the matrix (CYBR). Do you know if there is much overlap between these companies? CYBR does privileged account security.
@fredruffy Cyberark, Duo there are a ton of companies that do MFA, OKTA is wildly over valued.
fredruffy profile picture
tssai98 profile picture
Duo was acquired by Cisco
HardytheTrader profile picture
$OKTA looks quite expensive, but on the other hand its the clear leader of access management according to Gartner. Its worth the risk taking a small position now and add on the next pullback imo

The stock is great but the price is insane and many know that. If the $SPY tanks, the algos will drag OKTA gamers South kicking and screaming. Stay safe.
OKTA "expects" 771 million in revenue in 2021 - saying a company trading at 23 times FORWARD sales is "not cheap" is a huge understatement...

Do you mean understatement?
@Beirey LOL yes - why I shouldn't comment before my third cup of coffee!!!
Andres Cardenal, CFA profile picture
I get your point, but in these kinds of stocks you can't just look at the price in comparison to current sales. The value of the business ultimately depends on long term cash flow generation, and Okta has massive potential for growth in the years ahead. I am not saying that it is cheap by any means, but I don't think that it is irrationally overvalued either.
esodot profile picture
I am buying ... thank you
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