MongoDB
20. April 2021
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The Bullish Case: Okta’s stock has been a stellar performer over the past five years and has shown the increase in importance of cyber security. Okta has a high profile group of partners and clients which includes IBM, Deloitte, Accenture, KPMG, Nordstrom, MGM Resorts, and the U.S. Department of Justice. Okta recently acquired one of its largest competitors in Auth0 for $6.5 billion in an all-stock deal, showing that Okta is aggressively growing its strength both organically and through acquisitions. This year marks Okta’s first where it will reach $1 billion in revenue, and has shown at least 40% quarter over quarter revenue growth every year since it made its debut on Wall Street!
The Bearish Case: The cybersecurity industry is ripe with competition, and although Okta operates in a slightly non-traditional sector, it still sees itself up against the likes of CrowdStrike (NASDAQ:CRWD) and CloudFlare (NYSE:NET). Okta was also recently hacked in an infamous event that revealed security footage from places like federal penitentiaries and even a Tesla (NASDAQ:TSLA) production factory. While there were no direct effects, it did reveal that Okta’s network may not be as secure as first thought which could have damaging repercussions to obtaining future clients. Okta also trades at a 2020 price to sales ratio of about 47 times sales, and even if it reaches a revenue of $1 billion, it will still be a forward looking ratio of 28 times future sales. While not outlandish in the tech industry, shares have already corrected by nearly 30% off of the recent all-time highs of $294 per share.
Final Verdict: Despite concerns of an inflated valuation and the recent hack of its system, Okta is still well positioned to be a market beater for years to come. Revenue of $1 billion is a tremendous milestone and its acquisition of Auth0 only strengthens Okta’s moat and actually gives them a nice foothold in Europe. The future is bright for Okta, and right now investors can get the cybersecurity stock at a nice discount. Watch for this to be a ten-bagger moving forward!
