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Analysis of Okta Inc

Analysis of Okta Inc

7 September 2022

Okta: we need more revenue

The company manages user identification and access. In fact, it is a modern manufacturer of software that protects credentials – both programs and websites.

This cloud-based software is necessary in the modern world: it is needed so that fraudsters cannot get hold of personal data. The main share of the company’s revenue is a subscription to services, and only 6% of revenue comes from other sources. The lion’s share of revenue comes from businesses in the United States, which is more than 85%.

Business strengths:

  • the trend for remote work;
  • growing demand for cybersecurity services.

 Okta’s “Thin” points:

  • too high degree of operating expenses (growth by 5 times in five years);
  • the need to spend even more in order to increase revenue and take market share;
  • growing competition – LoginRadius and Akamai are moving faster;
  • a bet on a small business.

This month, Okta presented its financial statements for the second quarter of fiscal year 2023. Two points attract attention: a decrease in Non-GAAP net earnings per share to $0.11 against expectations of $0.30 and a 43% YoY ($451.8 million) increase in revenue for the quarter against the expected +38% YoY.

Against the company’s securities, the voiced expectations of management for a slowdown in revenue growth in the second half of the year came true. Total revenue is expected at the end of the year at the level of $1,812-1,820 billion, which means an increase of 39-40% compared to last year’s levels.

The consensus forecast for the stock is $110.

On the daily trading chart of Okta shares, the MACD indicator is declining in a positive area and signals sales. The Stochastic oscillator moves along in the oversold zone and does not give a clear signal.

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    ARAVANA Capital management
    7 September 2022
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