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Cloud Stocks: Okta Benefiting from App Diversity

Posted on Wednesday, Mar 11th 2020

According to a recent Fortune Business Insights report, the global identity and access management (IAM) market is estimated to grow from $9.5 million in 2018 to $24.8 billion by the year 2026. Recently, Okta (Nasdaq: OKTA) announced its fourth quarter performance that surpassed market expectations.

Okta’s Financials

Revenues for the fourth quarter grew 45% over the year to $167.3 million, ahead of the market’s forecast of $155.9 million. Net loss was $50.5 million compared with a loss of $30.8 million a year ago. Adjusted loss of $0.01 per share was also better than the Street’s estimated loss of $0.05 per share. Billings grew 42% over the year to $225 million.

By segment, subscription services revenues increased 46% over the year to $158.5 million. Professional services and the others segment revenues grew from $7 million a year ago to $8.8 million.

Among key metrics, Remaining Performance Obligations (RPO) grew 66% over the year to $1.21 billion. Dollar-based net retention also improved to 119% compared with 117% a quarter ago. Okta has been focused on attracting enterprise customers. During the last quarter, it added 550 new customers of which more than 140 were enterprise customers spending more than $100,000 on its platform.

Okta ended the year with revenues growing 47% over the year to $586.1 million and net loss of $208.9 million. On an adjusted basis, net loss was $36.7 million compared with a net loss of $34.1 million reported a year ago.

For the first quarter, Okta forecast revenues of $171-$173 million with a net loss of $0.24-$0.23 per share. It expects to end 2020 with $770-$780 million in revenues and non-GAAP net loss per share of $0.42-$0.37. The market was looking for revenues of $167.49 million for the quarter with a loss of $0.13 per share and revenues of $755.7 million for the year with a net loss of $0.29 per share.

Okta’s Growth Opportunity

According to its management, 73% of its customers are looking to expand their business with Okta this year and 0% are looking to reduce. Customer confidence has fueled Okta’s product development. Last quarter, it released DynamicScale, a leading customer identity solution that supports over 500,000 authentications per minute. The high capacity customer identity offering enables organizations to support the highly-trafficked apps and traffic bursts such as those experienced during a new product release, a viral marketing campaign, or a major shopping weekend.

Okta greatly benefits from the app diversity that exists within an organization. According to Okta’s reports, within its customer base, the average number of apps used by an organization grew 6% over the year to 88 this year compared with 83 apps a year ago, and 72 apps three years ago. Okta’s solutions are helping simplify and secure the access to these multiple apps by employees, customers, or partners. There is competition from big vendors like Microsoft, but Okta is not worried. Okta realizes that Microsoft’s IAM capability through Azure focuses on Microsoft’s technology instead of building an IAM that can cater to this wide range of apps.  

The market was pleased with its performance. Its stock gained 5% in the after-hours trading session. However, the current Coronavirus-driven market fear has hurt the stock as well. Its stock is currently trading at $119.21 and a market cap of $14.64 billion. It touched a 52-week high of $142.98 in July last year. The stock was trading at a 52-week low of $78.45 nearly a year ago.

This segment is a part in the series : Cloud Stocks


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