OKTA - Okta: Upmarket Momentum Should Reignite Investor Confidence

2024-07-01 03:15:01 ET

Summary

• Okta reported strong Q1 FY25 earnings, with revenue growing 19% YoY and non-GAAP operating income increasing 270% YoY.
• The company is seeing success winning large customer deals, particularly in the public sector, while customers with $100K+ in ACV grew 11.5% YoY to 4550 customers.
• Plus, its cRPO exceeded management’s expectations in Q1, indicating that its go-to-market efforts to realign its sales team and leverage its partner ecosystem are starting to bear fruit.
• Assessing both the “good” and the “bad”, I believe that Okta is attractively priced as it sees momentum growing upmarket while unlocking operating leverage at the same time.

Introduction & Investment Thesis

Okta ( OKTA ) is a cloud-based identity and access management company that has underperformed the S&P 500 and Nasdaq 100 YTD. I had last written about the company on April 23 and had rated the stock a “buy”. My thesis was predicated on my belief that the company should be able to reignite growth back into the business as it realigns its sales team and leverages its partner ecosystem to drive customer acquisition and expansion efforts, along with reinforcing the security of their access management platform by building out customer best practices and launching new products. Since the time of my writing, the stock has remained flat, underperforming the S&P 500....

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