Okta Has A 'Competitive Advantage,' Needham Says In Bullish Initiation Of Security Provider

Security and identity management provider Okta Inc OKTA is a core security holding, with the company's Cloud Identity system "a foundational security technology," according to Needham. 

The Analyst

Needham analyst Alex Henderson initiated coverage of the shares of Okta with a Buy rating and $38 price target.

The Thesis

"We expect Okta to continue to extend their lead over competitors as the scale of their partnerships and the expansion of their customer base outpace alternatives and amplify Okta's competitive advantage," Henderson said in a Valentine's Day note. 

Okta's revenues grew 65 percent over the last year and its customer base grew 41 percent, with dollar-based customer retention at 123 percent, according to Needham. 

The company is operating in a large and expanding market, with the total addressable market estimated at $18 billion, the analyst said. About 92 percent of enterprises surveyed are evaluating upgrading their identity posture, highlighting the opportunity before the company, the analyst said. 

The exceptional breadth of applications enabled by the Okta Integration Network is a significant competitive advantage, Henderson said. 

As a pure cloud SaaS offering, Okta has scale, presence and ease of use that eclipses any other alternative, the analyst said. 

Needham expects Okta to be able to drive multiyear outperformance, with the multitenant architecture and always-on capability providing the wherewithal to succeed in the space over the long haul. The company's pure SaaS model is likely to deliver the consistency associated with best-in-breed SaaS companies, Henderson said. 

The Price Action

Okta shares have been up about 36 percent since their Wall Street debut on April 7, 2017.

At the time of writing, the shares were up more than 5 percent at $33.18. 

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