Cloud Stocks: Okta Bounces Back Stronger Despite Security Event

Earlier this year, Okta (Nasdaq: OKTA) had reported an embarrassing security breach incident. If the market was worried about Okta struggling on account of the lapse, its recent quarterly results put all those doubts to rest. The stock market has been bumpy this year, and Okta’s stock had fallen by more than 70% since the start of the year. However, the quarterly results coupled with a strong outlook have sent its stock soaring again.

Okta’s Financials

Revenues for the first quarter grew 65% to $415 million, surging ahead of the market’s forecast of $388.98. Net loss per share was $0.27, significantly better than the Street’s estimated loss of $0.34 per share.

By segment, subscription services revenues increased 66% to $397.9 million. Professional services and the others segment revenues grew 55% to $17 million.

Among key metrics, Remaining Performance Obligations (RPO) grew 43% to $2.71 billion.

For the first quarter, it forecast revenues of $428-$430 million and net loss of $0.32-$0.31 per share. It expects to end fiscal 2023 with $1.805-$1.815 billion in revenues and non-GAAP net loss of $1.14-$1.11. The market was looking for revenues of $419.63 million and a net loss of $0.33 per share for the quarter and revenues of $1.78 billion and a net loss of $1.26 per share for the year.

Okta’s Product Upgrade

Recently, Okta announced the plans for the launch of Okta Identity Governance later this quarter, after its successful early access program. Customers that need a cloud-first approach to their identity governance needs are able to use Okta Identity Governance for modern identity governance and administration (IGA). The service offers a cloud-first approach to IGA and delivers self-service identity governance and administration for all users within the extended enterprise with a single control plane, allowing it to meet compliance requirements without having to sacrifice speed in hybrid and multi-cloud environments.

The service is expected to provide an increased user productivity and IT efficiency, deliver better security and compliance outcomes by automatically suspending access to resources based on user status changes in HR systems and directories, and drive cost savings and agility by utilizing open standards and extensible API-based interfaces.

Earlier this year, Okta’s system was hacked by Lapsus$ hacker group. The breach was a cause of significant embarrassment for the company given Okta’s role as an authentication hub for managing access to numerous other technology platforms. Since the news of the attack, Okta has been conducting an in-depth forensic analysis of the event. According to the company, the access period for the hack was 25 minutes that impacted only two Okta customers’ authentication systems. During this brief period, Lapsus$ was also not able to authenticate directly to any customer accounts or make configuration changes.

The breach may have been much smaller than anticipated earlier, but it is still a cause of concern for an IT security player. To address the concerns, Okta has committed to taking action on a number of fronts, including requiring more robust security measures from its third-party service providers and better processes for communications. Okta believes that identity management will remain key to successful secure cloud management, and it is well-positioned to establish itself as a primary cloud and the standard for digital identity. It does not think that the security incident had any impact on its financial results.

Its stock is currently trading at $92.6 with a market cap of $14.6 billion. It touched a 52-week high of $276.30 in August last year. It hit a 52-week low of $77.01 earlier this month.

Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research ...

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