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No. of Recommendations: 23
I would like to start off with some numbers for OKTA first. They went public in Q118, the beginning of 2017.


in 000's Non-Gaap
Q117 Q217 Q317 Q417 Q118 Q218 Q318 Q418
Rev 31,787 37,436 42,383 48,820 53,007 60,095 68,238 77,750
Growth% 66.8% 60.5% 61.4% 59.3%
EPS -1.04 -.90 -.89 -.66 -.50 -.16 -.19 -.10
Cash 70,169 54,968 42,133 37,672 224,226 213,219 223,618 229,714
Debt 0 0 0 0 0 0 0 0
FCF -15,962 -13,940 -10,144 -8,308 -12,134 -8,946 -9,885 -824
Customers 3350 3650 3950 4350
Cust ov/100,000 493 539 603 691


The cash went up in Q118 and that is when they IPO'd But as you can see they did gain a little cash in Q418 and they were almost FCF positive in that quarter also.

They are growing their customer QoQ at a rate of 8% to 10%, This is to short of a time to see how it is trending. Their customers with a spend of over 100,000 is growing QoQ too, this is trending up every quarter, starting at 9% growth from q218, and going to 14% growth between Q418 and Q318.

Their FCF is going in the right direction and I believe they will be FCF positive next quarter, This is very important because they will no longer be burning cash. The CEO stated that FCF will be bumpy, quarter over quarter.

So what does OKTA do? They are and IaaS company. (I know another acronym. It people love their acronyms because they think the more acronyms the smarter they are. You really want to have fun? Go into a meeting with a bunch of IT techs and start making up acronyms. See which ones nod their heads like they understand what you are saying. ) What this acronym means is Identity As A Service. OKTA puts their identity in the cloud. So all of the old companies had their identity on their servers and they all had a package that needed to be updated individually when ever there was a security breach. You had to buy the package and update it. What OKTA does if they have a breach of any type is upgrade one service in the cloud and everyone is patched at once.

They have six different products that operate as a unified platform and together make up the Okta Identity Cloud.

Okta Single Sign-On, which enables users to access all of their applications from any device with a single set of credentials.

Okta Universal Directory, which provides a centralized, cloud-based, flexible store to capture user application and device profiles as well as the relationships between those profiles.

Okta Adaptive Multi-Factor Authentication, provides an additional layer of security for data and applications while using modern authentication factors such as text messaging and push notifications.

Okta Lifecycle Management, is a provisioning product that automates IT processes and ensures user accounts are created and deactivated at the appropriate times.

Okta Mobility Management, uses identity to automate mobile device administration and provisioning across phones, tablets, and laptops, providing seamless and secure mobile access to any application without compromising security.

Okta API Access Management, enables organizations to connect custom Web and mobile experiences to cloud or on-premise services through APIs.

Gartner Magic Quadrant and now Forrester Wave, has consistently put them as the leader of IaaS with Microsoft a close second, but what was interesting, in Q318 one of Microsoft's customers replaced them with OKTA. Why would they do that? I suspect that nobody wants to be locked into Microsoft's ecosystem. OKTA plays with all security and web appliances. So if you are AWS, GOOGLE, Microsoft, Cisco, Palo Alto, F5, you name it, OKTA will work with you. They have over 1000's apps preloaded into their library and they even have a wizard that will allow you to put any other app they do not have, into your library. You only log in once and then it allows you to access any app for your company. This is the way everything is going, to the cloud, and this is the new way of security. You can still have a fob but that fob will work in tandem with OKTA. So lets say you have a key fob for every financial or business you interact with. Fidelity, Schwab, etc. Well this would cut you down to one. But then lets say you do not want a fob, well then go with multi-factor authentication. That's where you try to log in and then a sms text message is sent to your cell phone asking if you are trying to log in and when you say yes it gives you a password. Very easy and convenient.

They get their revenue through subscriptions and professional services, and charge a 2 to 3 year subscription to the large enterprises, and 1 to 2 years to small and medium size business.The biggest majority of their Revenue though is with subscriptions. They bill the customers usually a year ahead of time. OKTA business model is a land and expand, so when they get their foot in the door they usually end up selling more. This is shown by their dollar based retention rate which was at 123% in Q118, but is now at 121% in Q418. This needs to be watched.

So does OKTA have a moat? I would say very slight, they have a good product that is growing very fast and once they get someone into their ecosystem they keep selling them more products. I think they need to get them in as fast as possible because then they just keep billing them and the customer is reluctant to leave. So as they grow they suck all the air out of the space and gain bigger market share. I think there is a good chance that they will be bought out though, but right now they work with everyone and I think that is a big plus.

OKTA is working with business's and enterprises but I wouldn't be surprised if they move into the individual market. How many of us would like to have something like this that would allow us to securely log into all our financial sites. Also could you see instead of logging into sites using your google log in or facebook log in you could use OKTA. Also OKTA wouldn't track you or sell your information.

While this company does have a high P/S of 17, it is growing over 60% YoY. That's phenomenal.
Oh and for all my Extreme Conservative friends you will probably be glad to hear that at this years OKTANE (OKTA convention) The key note speaker is Barak Obama and just your luck you can still see the whole thing in Las Vegas on 5/22.

Andy
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No. of Recommendations: 2
What this acronym means is Identity As A Service.

Bad idea since IaaS already means Infrastructure as a Service.
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No. of Recommendations: 11
What this acronym means is Identity As A Service.
Bad idea since IaaS already means Infrastructure as a Service.


LOL that doesn't surprise me Tamhas. It's funny how language was made for people to understand each other but in the Technical world so many people make up acronyms to shorten up meanings and then use that to beat up on people who do not understand.

I was in a meeting with a manager over the IT department and I had a young tech that I was training. The IT manager started spouting all these acronyms that the young tech did not know. He asked the manager of the meaning and the manager started making fun of him. I couldn't believe it so I told the young tech not to worry about it, I would explain on the acronyms to him later on. But in the meantime I started making up acronyms and spouting them off to the manager. The manager just sat there and shook his head like he understood what I was saying. When we left the meeting the young tech asked me about the acronyms I was spouting off and I told him they didn't mean anything, that I just made them up. We both had a good laugh over that.

The lesson I was trying to teach the tech was that just because you do not understand what a word is trying to convey, doesn't mean you don't understand the concept.

Andy
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No. of Recommendations: 2
What this acronym means is Identity As A Service.
Bad idea since IaaS already means Infrastructure as a Service.

IDAAS then...
A
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No. of Recommendations: 1
It used to drive me crazy when IBM reps would try to phonetically pronounce the acronyms as words.
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No. of Recommendations: 10
Has survive the frustratingly particular potty propensities of my beagle. My beagle's PPPs I wager in today's modern parlance when trying to find flooring hardy enough to withstand.

As to Okta, I am never backward looking, only forward looking for valuation but learning from the past to add to the future prognostications.

With Okta, what I see, and it may require another look as I have been traveling all weekend and only got any sleep last night was something like 8x enterprise value for next year.

Sorry, but if Okta will be a successful long-term company, and I honestly do not see a real competitive threat. Won't be Microsoft, not Amazon, they are far and away the leader in what they do, this is one of those companies that has what we always like, and that is limited competition with an extremely long-term growth profile.

Analyst opinions are of course to be taken with a grain of salt, but like with Arista, when you could read something quite special into it that you normally do not find in their publicly available opinions, here is one from today (or a few days ago, I don't remember):

https://finance.yahoo.com/news/okta-run-playbook-flawlessly-...

Something like one of those few companies with 10 bagger potential businesses. Such numbers can be ignored but the qualitative features that go with it concerning their CAP and their TAM are not to be so quickly tossed out. We of course have no idea what the stock might do, but with a CAP and a TAM as Okta appears to have (despite very suspect decision making in regard to who they believe are role models to rouse up the troops) share price appreciation tends to follow almost inevitably at some point.

What a higher valuation like this produces is greater volatility. Volatility is not risk. That is because there is always a battle between those that call it a Wall Street "darling" and those who recognize the CAP and TAM and see that its forward valuation (which absent a recession will probably go up anyways) is reasonably priced.

That is my conclusion with OKTA. I do not buy that someone out of the blue is going to come around and steal their customers or come around and SUDDENLY become a huge competitive problem. OKTA is too far ahead and there is too little reason to switch based upon product quality and product pricing and product road map and product maturity and product integrations, and like with Nvidia, no one can keep up with where OKTA is going much less catch up to where they have been.

Like with any company, such as Amazon was, you never know where it might go. Amazon is no way worth what it currently is because of its retail business. I think we all recognize this. And in fact its retail business is able to be this dominant precisely because they created the dominant public cloud, and the public cloud is going to be far larger than we currently imagine, as everything is being written these days to run on the public cloud as an option, and sometimes on a local cloud. If the world is going to run on these public clouds, then $50 billion in annual revenues is far from being the world.

Similarly, who knows what Okta will do or won't do. Could be the decision making evidenced by the Obama invite was a warning we should not have ignored as OKTA commits corporate suicide or the like. But...that is probably not going to happen.

We shall see what OKTA can become, but what it is now is the leading plug to a security problem that will never go away and is in fact the most vulnerable point of any security plan but that is most incompetently addressed.

Tinker
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No. of Recommendations: 0
https://www.barrons.com/articles/okta-as-big-a-deal-as-oracl...

Here is some hyperbole from the CEO of OKTA, but it is the goal, to become the de facto access point for apps on the web, both on the business side and the consumer access side.

Wouldn’t it be a great world if you could access all your apps, all your accounts, with just one password, one system, etc. If that is to be the case, yes, a de facto standard would be necessary one might think.

However, one’s security would also seem to be more precarious if one system to rule them all accessed them all. With blockchain, yes. That appears to be eminently secure. But can OKTA truly create that type of security to make such not so precarious?

I do not know, but the above is the hyperbole and the goal, for whatever it is worth.

Tinker
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No. of Recommendations: 13
Something like one of those few companies with 10 bagger potential businesses. Such numbers can be ignored but the qualitative features that go with it concerning their CAP and their TAM are not to be so quickly tossed out. We of course have no idea what the stock might do, but with a CAP and a TAM as Okta appears to have (despite very suspect decision making in regard to who they believe are role models to rouse up the troops) share price appreciation tends to follow almost inevitably at some point.

Tinker:

Let's just cut to the chase because this thread was started with a very superficial analysis.....you and Andrew are pitching this stock pretty hard and yet, I haven't seen your usual compelling argument.

So distill this down to the essence of EXACTLY why OKTA is the 10 multiple you and Andy claim.

And tell us again how a 17 P/S company with such "massive demand", why then do we see:

1) That “identity and access management” is expected to grow 13% CAGR to $15 Billion in 2021. According to a Market Research Engine report published earlier this week, the global Identity and Access Management is estimated to grow 12% annually over the next few years to become a $14 billion industry by 2023. What other corroborating data do you have to support more growth than that? Who/what has that largest piece of the pie at this time as just how/why is OKTA going to displace them? At already a $4.5 Billion market cap, let's just say it one day gets to $1 Billion revenue (3-4 years from now based on their projections)......you are going to give it a ? multiple then.....7 gets you 55% gain from here??

2) AWS has 47% market share for the cloud and offers its own free SSO product. You really think that a company like AWS can't wipe OKTA away if/when the money were worth it to them? Each of these cloud vendors will no doubt try to develop lock-ins to their cloud environment IMO. I understand that OKTA wants to be cloud agnostic, but the clouds don't necessarily want that.....I expect them to compete to lock customers in. Seems we have heard several people now claim that OKTA product isn't all that special.....so again, spell out the precise moat you claim exists against all other disruptions?

3) Switching costs are minimal....from what other users have told us.

4) They guided decelerating revenue growth for 2019 (down to 36%).....how is that possible with demand you say exists? And what risk premium are you paying now at P/S 17?

5) I get that the partnerships with Sailpoint and PANW are valuable, but they may be just about survival against the big 3, ASW, MSFT and IBM.

The technicals look good, the analyst upgrade yesterday was helpful.......but you are buying a company with a P/S of 17 and previous 62% revenue growth guiding revenue deceleration to 36%??

Why, in all the landscape of options for investing, do you feel so optimistic with OKTA?
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No. of Recommendations: 1
I have not bought OKTA yet, and really have not had time to pound through it. But what I do see from a fundamental perspective is a greater CAP than you are suggesting and a forward price to sales is 1/2 of what you are stating.

But this said, I have still just done nothing as lack of time enforces good investing discipline.

I have 3 stocks and am loooking for number 4.

Tinker
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I have 3 stocks and am loooking for number 4.

NVDA, ANET, annnnnnnd MongoDB? Or Pure Storage?
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No. of Recommendations: 3
Not Mongo. Put that one on the shelf for now given the lock up (as we discussed with Duma) and perhaps we do not understand it well enough yet (for a more concentrated portfolio). As for PSTG no comment. It certainly could/or could not be as its risk/reward profile is quite nice.

No, SHOP is #3. I bought back into it on its crash day. I was not so enamored when it was just a small merchant company with quality issues and drop shippers and the like supporting a large valuation, but with B2B and Shopify Plus as its new focus...I jumped back in. My trade out did pay off, as I have more shares now than I use to have, but perhaps not worth all the hassle to get there.

Oh frick...that reminds me I still need to file my taxes!!!!

Oy, well, tomorrow night. Have calculated my income, so just need to get it down on the returns.

You can see why the do nothing strategy works so well for me. And I want stocks that I can just do nothing with.

Tinker
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No. of Recommendations: 1
However, one’s security would also seem to be more precarious if one system to rule them all accessed them all. With blockchain, yes. That appears to be eminently secure. But can OKTA truly create that type of security to make such not so precarious?

My PRECIOUS!!
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