The Case For Being Optimistic On Okta

Following the non-deal roadshow KeyBanc Capital Markets hosted with Okta Inc OKTA's senior executives, the firm delved on the reasons for it being optimistic on the company.

As such, the firm reiterated its Overweight rating on the shares of the company, with a $35 price target for the shares.

Analysts Rob Owens, Mike Casado and Liz Verity said Okta's differentiation is becoming a necessity in the cloud world, heightening the demand for the company's platform, supporting strong business momentum and lends optimism to the long-term opportunity. The management noted several tailwinds arising from the ongoing momentum of cloud and mobile technologies.

Meanwhile, the analysts said legacy systems will continue to fall short, as syncing them with the changed approach will require costly back-end integration work, cumbersome authentication processes, or reduced access for employees, and deployments of multiple identity point solutions.

The analysts said insufficient legacy identity strategies put to risk valuable company resources, as cloud and mobile technologies have broad access to these.

"As a vendor-agnostic identity platform offering more than 5,000 third-party integrations, Okta is becoming even better understood as a necessity in the cloud world, in our view," KeyBanc Capital Markets said.

The firm noted that Okta is now the single largest cloud-identity pure-play on a customer basis. Thus, the firm said the company is executing against the opportunity.

While making note of Microsoft Corporation MSFT's identity investments that have worried investors, the firm said Okta's management believes it still has 3- to 4-year technological lead on the former. At this juncture, the firm said it is confident in Okta's potential to continue to differentiate by way of a high innovation cadence.

"Despite its lofty valuation premium, Okta's high growth, high renewal rates, strong unit economics, and competitive differentiation within a nascent market of high promise all contribute to our favorable outlook and justify further upside, in our view," the firm said of Okta's valuation.