Analyst Note| Mark Cash |
We are raising our fair value estimate for narrow-moat Okta to $280 per share from $250 after the company reported second quarter results, and we view shares as modestly undervalued. Our increase stems from anticipating higher growth in the coming years as the identity and access management leader lands new customers at a rapid rate while reaping more spending with existing clients as firms consolidate various security and access needs on Okta’s platform. While Okta’s identity and access solutions for workforces remain the largest portion of sales, the addition of Auth0 accelerates Okta’s disruption into the burgeoning customer identity and access market, aimed at enabling a secure journey for users of a client’s applications. We also believe that Okta will remain an outsized beneficiary of organizations adopting the latest best practices regarding a zero-trust architecture, which can rely on some of Okta’s key solutions like multifactor authentication.