Okta Stock Is About More Than Just the Cloud

OKTA has been expanding its platform into areas like hybrid environments

The day after Okta’s (NASDAQ:OKTA) earnings call in early June, I talked to the company’s co-founder and chief operating officer, Frederic Kerrest. We had a good conversation about creating a multi-billion dollar software company.

Okta Stock Could Realize an 80% Upside Sooner Than You Think
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I also asked him about the gains of OKTA stock, which was up sharply. But he actually had to check to see what OKTA stock price was! I was certainly impressed. I guess it’s a good idea not to get obsessed about stock prices when building a multi-billion-dollar software company.

Over the years, OKTA has definitely made a lot of good moves. Frederic and his co-founder, Todd McKinnon, saw that the cloud would be a mega-trend and that businesses would needsoftware to help manage their cloud apps. It certainly helped that,  prior to launching OKTA, both men  worked at Salesforce.com (NYSE:CRM) and saw the challenges that company had faced.

Today the company has a platform that provides access management and top-notch security for firms’ employees and customers. Some of its features are advanced server access, single sign-on, universal directory, authentication and authorization.

Its growth has been rapid and it shows few signs of slowing. During its latest reported quarter, its revenues jumped  49% to $140.5 million and its subscription revenues shot up 51% to $132.5 million. OKTA has over 7,000 customers, including Slack Technologies (NYSE:WORK), Nordstrom (NYSE:JWN) and JetBlue Airways (NASDAQ:JBLU). More than 1,200 of its customers spend over $100,000-plus annually on its products, so its software clearly has strategic value.

It’s a mistake to consider OKTA a pure cloud player. The company has, quite intelligently, broadened its product offerings to handle hybrid environments. There are still many companies that do not want to go all-in with the cloud because of security concerns or costs.

For example, a Fortune 50 company was recently looking for a better identity management system. But the company also needed a tool that it could use to manage its hybrid environment, and OKTA’s product turned out to be the right fit. The customer now uses OKTA’s offering to help manage more than 400,000 global employees and contractors.

Another one of OKTA’s advantages is that it offers multiple products, which leads to increased monetization. Generally, it first sells its identity and access management platform to a new customer. After the customer gets comfortable with the platform and sees its benefits, OKTA will then look to convince it to buy its customer identity  system. Finally, OKTA’s recently launched Advanced Service Access software may further raise its top and bottom lines,boosting OKTA stock price in the process.

The Bottom Line on OKTA Stock

When it comes to access management, OKTA is the gold standard. Consider that research firm Gartner has identified the company as the leader of the category.

OKTA’s strategy of focusing mostly on large enterprises makes a great deal of sense. These companies not only provide significant revenue opportunities, but they have the most challenging security problems. Besides, OKTA’s technology  helps accelerate companies’ transformation to digital systems.

Granted, OKTA stock price is  far from cheap. Note that OKTA is trading at a hefty 29 times its sales. Even compared with other hot tech firms, that is steep.

But then again, OKRA deserves a premium because of its growth, the strength of its technology and the new purposes for which its products can be used. Basically, for investors who want exposure to multiple, non-cyclical growth trends in tech, OKTA stock is a good choice right now.

Tom Taulli is the author of the book, Artificial Intelligence Basics: A Non-Technical IntroductionFollow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media, https://investorplace.com/2019/11/okta-stock-is-about-more-than-just-the-cloud/.

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