One of the burgeoning areas of the IT security and data management field is identity management (IdM), also known as identity and access management (IAM/IdAM).
IdM is a set of policies and technologies that work to guarantee that the appropriate users have equally appropriate access to technological resources within an enterprise. These IdM systems exist to simultaneously identify, authenticate, and even take control of who accesses a business’s internal resources, hardware, and applications.
As regulatory compliance requirements grow increasingly more complex, these identity and access management policies and technologies only continue to become more and more essential for businesses big and small.
Okta Inc stock is a leader within the IdM industry and it’s well worth considering.
Okta at a Glance
Okta Inc. (OKTA) operates by providing cloud computing software specially designed to assist companies in managing and securing user authentication within applications.
Beyond this, Okta offers developers the ability to implement identity controls into applications, website web services, and devices. Okta’s lineup of products currently consists of 10 tools, including Universal Directory, Multi-factor Authentication, User Management, B2B Integration, Access Gateway, and a handful of others.
In addition to these 10 products, Okta also offers six services for users, including (but not limited to) API authentication services, which is an application program interface that connects computers or computer programs to one another, and single sign-on services, which allows users to log into Gmail, Workday, Salesforce, and Slack with one convenient login.
So far, for Okta’s 2021 fiscal year, the company’s financials are looking solid — due, at least in part, to the company’s acquisition of Auth0, an authentication and authorization platform that was once seen as a competitor for Okta.
The company’s total revenue for the second quarter of fiscal year 2022 was $316 million, which represents a remarkable 57% increase year-over-year.
Additionally, subscription revenue topped $303 million, an even greater 59% increase year-over-year. Excluding money made through Auth0, total revenue still grew an impressive 39%.
At the end of July 2021, Okta’s cash, cash equivalencies, and short-term investments totaled $2.47 billion. This is a lot, but it’s worth considering it in comparison to the company’s GAAP net loss for the quarter, which was $277 million — up quite a bit from the GAAP net loss from Q2 of fiscal year 2021, which was only $60 million.
That equates to a loss per share of $1.83, nearly four times as much as the loss per share from Q2 2021, which was just $0.48 per share.
This has a lot to do with the company’s calculated billings, which increased 83% year-over-year for Q2 2022.
The company cites billings process improvements for this increase in losses, but even if you exclude these changes, billings still increased 74% for the quarter year-over-year.
Looking forward to the third quarter of fiscal year 2022, Okta predicts to see a total quarterly revenue between $325 and $327 million (a 50% increase year-over-year, if the company’s prediction proves to be accurate).
Okta also hopes to bring its non-GAAP net loss per share down to $0.25-0.24 per share in the third quarter of 2022, which would be great news for the company overall.
For the fiscal year on the whole, Okta expects to see a total revenue between $1.24 billion and $1.25 billion, which would represent a growth rate of around 50% year-over-year.
According to financial analysts, this could have the potential to drive Okta stock from its current price per share of around $270 all the way up to $325 per share.
Is Okta Investing in Growth?
While these substantial net losses might be concerning for plenty of retail investors and traders, Okta hopes to deter any fears by assuring its investors that the company is spending money to invest in growth.
This can be seen with the company’s acquisition of Auth0, and in Okta’s aim to be a growth company through and through.
Whether or not Okta will acquire any more of the competition in the quarters to come remains to be seen, but it doesn’t seem out of the question whatsoever for the higher-ups at the company. Investing in growth is definitely a top priority.
Okta’s Subscription Revenue
As evidenced in the company’s Q2 earnings for 2022, subscription revenue is hugely important to the continued success of Okta going forward. (After all, the company made $303 million from subscribers in Q2 alone.) Overall, Okta says that subscription revenue accounts for 96% of its total revenue.
As such, it’s critical for the company to continue to try and grow this subscriber base as much as possible to drive that revenue up.
Needless to say, this is a major goal for Okta headed into the second half of the 2022 fiscal year and beyond. There’s nothing indicating this growing subscriber base will slow down, which bodes well for both the company and its investors.
Okta’s Shakeup at the Top
It’s worth mentioning one big potential cause for concern with Okta, and that’s the recent string of shakeups at the top of the company: The company’s CFO stepped down at the start of June, just six months after stepping up to the position.
While Okta and its higher-ups assure investors that this is nothing to worry about, it’s undoubtedly not normal and could potentially signal something strange internally.
It may be irrelevant, especially because former CFO Mike Kourey is still staying with the company as an advisor to the company, but it’s still worth keeping an eye on should other top brass depart.
The Bottom Line: Is Okta Stock a Buy?
Whether you look at Okta at a glance or dig in deep to the company’s financials and strategies, it is clear that Okta is more than worthy of the attention it has received from investors as of late. Even with its significant losses and its fleeting CFO, Okta’s growth has more than makes up for these hurdles by bringing in a huge amount of money from an ever-growing number of subscribers and investing that money in continued growth into the future.
As the field of IT security and data management grows bigger and bigger, Okta should rise in tandem. A good sign is its performance during the course of the COVID-19 pandemic — Okta increased its price per share from $114 in March of 2020 to $270 in September of 2021. Looking at all of these factors combined, Okta stock is a solid buy.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.