Cyber security is one of the most important issues facing humanity today. With everything from school and work to all the things we do to distract ourselves going virtual in 2020, hackers are bound to find vulnerabilities.
Damage from cyber crime is estimated to reach $6 trillion in 2021, according to analyst firm Cybersecurity Ventures. Investing in the frontline of cyber security means you’re likely looking at Okta vs Crowdstrike stock.
Each company takes a different approach to combatting cyber criminals and protecting data. As technology moves forward, everything from manufacturing and distribution to municipal services, retail, and even the military is connected.
Maintaining this security will be pivotal as the world enters the quantum age of computing. Here’s everything you need to know about these two cybersecurity stocks.
Okta Stock IPO Made Its CEO A Billionaire
Okta Inc (NASDAQ:OKTA) is a San Francisco-based identity and access management company that was founded in January 2009 by two former Salesforce executives.
The company offers a variety of cybersecurity services, like a single sign-on (SSO) solution that enables login to G-Suite, Salesforce, Slack, Workday, and more.
It also offers authentication, multi-factor authentication, a secure universal directory, and API products to integrate security into proprietary internal systems.
It also works with the U.S. Department of Justice, and these relationships became integral in 2020 as the novel coronavirus forced everybody to work virtually.
In a new remote-work environment with technology invading every aspect of life, organizations need secure and efficient ways to keep employees online and processing data to serve customers.
Okta’s 2017 IPO price was $17 per share. In a post-COVID world, Okta is riding a wave of success. Stock prices hovered in the $100-120 range before the crisis and has held steady around $200 since May.
The stock is still a Buy/Hold from most analysts, as its proven track record will only open the doors to growth as more companies seek to cloud security infrastructure tools.
Of course, there’s more to security than just identifying yourself, and that’s where Crowdstrike comes in.
Crowdstrike Is Called For High Profile Hacks
Crowdstrike Holdings Inc (NASDAQ:CRWD) is a full-service cybersecurity company founded in Sunnyvale in 2011. It provides threat intelligence, endpoint security, and cyberattack incident response services.
The company worked on several high-profile cases over the past nine years, including Sony’s 2014 hack and several concerns surrounding cybersecurity in the 2016 election.
It regularly publishes research on emerging cyber threats like malware, ransomware, and botnet attacks.
An August 2020 report from INTERPOL found cybercrime increased during the coronavirus quarantines. Member countries reported increases of up to 59% in phishing, ransomware, and other malicious attacks.
This trend continued through the rest of the year, affecting everything from healthcare to government, education, retail, and industrial sectors. Increased threats are expected to continue moving forward, because of the continuing socioeconomic turmoil and historically high unemployment rates.
In June 2019, Crowdstrike’s IPO launched at $34 per share and has grown steadily since. The price more than doubled since January 2020, increasing from the $50 range to over $120 by the middle of September.
While this is a healthy increase, it’s not as large as a tech stock like Zoom Video Communications Inc (NASDAQ:ZM), which saw returns over 700 percent. This means there’s still plenty of room to grow, giving it a mixed Hold/Buy rating from investors. Every investment has risks associated though.
Risks of Okta Stock
Okta has a mostly subscription-based pricing model, and this means it has a sticky product with high retention rates compared to a one-time product sale. It continues posting big losses in key areas for customer acquisition, research and development, and other operational expenses.
It has coronavirus momentum, but it needs to convert that momentum into sustainable sales revenue for it to be worthwhile. And it’s not without competition.
The list of enterprise SSO providers alone is growing, with vendors like Microsoft (NASDAQ:MSFT), IBM (NYSE:IBM), Oracle (NYSE:ORCL), and more involved in the market. Providers like Facebook, LastPass, and Duo Security also have strong footholds in that market.
There are also companies lining up to provide its other services to both enterprise and consumers alike. Many of these companies are starting to grow and merge to create even bigger competition, like Broadcom Inc (NASDAQ:AVGO), which we’ll discuss more in the next section.
While the market is growing, there’s no guarantee that Okta will continue growing enough to justify a higher stock price. It’s possible that it already topped out, leaving very little room for investors to make tangible gains jumping in now.
Dangers of Buying Crowdstrike
Like Okta, Crowdstrike faces major competition, most recently when Broadcom acquired Symantec in a $10.7 billion cash deal in November 2019. This puts the company in a position to control both the hardware and software sides for its enterprise customers.
The deal so far benefits Crowdstrike, but it also makes it tougher to pick up larger contracts moving forward. Similar steps are sure to follow, leaving an acquisition by a company like Oracle, Microsoft, or Google as a possible exit strategy.
Crowdstrike needs to continue showing investors a solid and sustainable return, which is ultimately driven by revenue growth. Otherwise, its market capitalization could deflate over the next year, leaving investors feeling shorted.
Crowdstrike Vs Okta Stock: The Bottom Line
Cybersecurity is a major issue, and that became clearer during the shift to virtual work during the coronavirus pandemic. Organizations already prepared for the remote workforce are continuing to thrive, while companies like Okta and Crowdstrike that enable this transition are poised for the biggest gains.
Both are solid investments that should be held if you already own it. However, it remains to be seen whether current pricing is the peak for each company or whether it’s just another step in a long-term growth play.
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.