Why Goldman Sachs Likes Okta Stock: 'Demand For Cloud Native Identity Is Accelerating'

With increased digitization comes increased security threats. Trends in increased cybersecurity demand have Goldman Sachs analyst bullish on Okta, Inc. OKTA.

The Okta Analyst: Brian Essex initiated the firm’s coverage of Okta, Inc. with a Buy rating, setting a 12-month price target of $312.

The Okta Takeaways: “Demand for cloud native identity is accelerating,” a market Okta is a leader in through its best-in-class workforce solutions, said Essex in a Tuesday note.

The customer identity and access management (CIAM) market is growing faster than workforce identity solutions, noted Essex.

Okta is positioned to be the largest vendor in the space following the May 3 closing of its acquisition of Auth0, one of its largest CIAM competitors, the analyst said.

At the end of FY21, CIAM made up 25% of Okta’s revenue, and the acquisition of Auth0 is expected to add $215 million of ARR to Okta’s CIAM platform by FY22, said Essex.

Okta’s enterprise customer growth and installed base is outpacing growth in smaller customer installations, suggesting the company will see improved retention rates and “better long term unit economics over time.” said the Goldman Sachs analyst.

Next year, Okta intends to expand its cloud-based security offerings to the identity governance and privileged access management spaces, noted Essex. These markets will grow Okta’s currently estimated $65 billion TAM to $80 billion.

Related LInk: Morgan Stanley’s top cyber security picks going into the second half of 2021.

OKTA Price Action: Okta shares were up 1.44% to $249.09 at last check Tuesday.