2 reasons to add Okta stock to your portfolio

Historically, companies have hosted and protected their digital assets within closed corporate networks. All installed software and infrastructure were maintained locally, and by default, all company employees on the corporate network were trusted.

However, this approach has now lost its relevance. Many businesses have moved their resources to the public cloud, an environment outside of their control. In addition, the pandemic has greatly accelerated the trend towards remote work, which has made cloud services even more relevant.

Along with all these changes, a new concept of cybersecurity has emerged: zero trust (zero trust). In this model, no user or device is trusted by default. Instead, each user should be constantly checked when trying to access applications and / or data.

The company that will be discussed below is precisely engaged in ensuring cybersecurity when working with cloud services. Here is a short review of Okta (NASDAQ: OKTA) in which I tell you about two reasons why its stock should be added to your portfolio.

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Reason 1: Acquiring Auth0

Okta specializes in Identity and Access Management (IAM). Its platform allows customers to control access to corporate resources based on settings such as allowed user devices, network, and location. What’s more, Okta Identity Cloud solves the challenges of connecting both employees and customers to the network, ensuring that the right people are securely connected to the right services.

In May 2021, Okta acquired Auth0 in a $ 6.5 billion stock deal. This step is important for the company for two reasons:

  1. By recruiting Auth0, Okta is strengthening its business while eliminating one of its main competitors;
  2. This greatly expands the company’s reach in terms of audience reach: Okta targets enterprises, and Auth0 targets developers.

Okta’s strength lies in its network of over 7,000 built-in integrations. They provide customers with out-of-the-box access to applications like Microsoft 365, cloud infrastructure like Amazon Web Services, and cybersecurity platforms like CrowdStrike.

In comparison, Auth0’s strength lies in its developer-oriented software tools. In particular, its platform allows customers to easily embed credentials into custom applications.

In other words, the acquisition of Auth0 is particularly beneficial in the area of ​​customer identity and access management (CIAM), a market valued by management at about $ 30 billion. Moreover, Okta believes the acquisition will accelerate its revenue growth, creating synergies that will enable the company to operate more effectively in the IAM market as a whole.

Reason 2: New products for employee identification

In November 2020, Gartner released a report predicting that by 2024 at least one IAM vendor will provide identity governance and administration (IGA) and privileged access management (PAM) products. Okta became that supplier in April 2021.

During the Oktane21 conference, the company’s management introduced two new products:

  • First, Okta privileged access is a PAM solution. This solution extends Okta’s identity framework to so-called accounts. superusers such as system administrators. If hackers compromise these privileged credentials, they can gain access to almost any corporate resource. To mitigate this risk, Okta PAM restricts superuser rights to only when needed;
  • Secondly, Okta Identity Governance is an IGA solution. This product uses the Okta Identity Framework for automation and regulatory compliance. For example, new employees may be automatically given the access they need to do their job, and if their employment status changes (for example, due to vacation), permissions may be automatically suspended. This helps businesses operate more efficiently while reducing the burden on IT professionals.

The combination of Okta IAM, PAM and IGA is important for two reasons:

  1. It strengthens the company’s advantage over competitors such as Microsoft and Ping Identity, as neither of these companies offer PAM or IGA products;
  2. This increases the total IAM addressable market for Okta to $ 50 billion.

The essence

Taken together, all these factors make the future of Okta quite predictable. They not only expand the company’s addressable market to $ 80 billion, 88 times its sales in the past 12 months, but also strengthen its competitive edge. What’s more, they allow Okta to capitalize on the growing need for security built around zero trust… This is why I think that in the future, at least for the next five years, these stocks will outperform the market.

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