Mr. Market thinks Okta (OKTA) can make money from an identity cloud. Okta had an $85.27 share price on 20 December 2023.
Okta offers cloud-based Customer Identity and Access Management (CIAM) solutions. For example, its Customer Identity Cloud provides authentication, verification, and other services for organizations. Both consumer apps and Software-as-a-Service (SaaS) apps provide identity solutions for Okta customers.
Meanwhile, the Workforce Identity Cloud allows organizations to verify and protect employees, contractors, and partners’ identities. For example, the Workforce identity Cloud provides phishing resistance to popular identity theft tactics.
The Okta Workforce Identity Cloud
They claim the Workforce Identity Cloud provides pass-wordless authentication for employees. It also provides streamlined access for every member of the organization.
SSO provides Single Sign-On (SSO) provides secure cloud sign on for an organization’s IT. FastPass offers pass-wordless authentication for all applications. A Universal Directory creates one directory for all users, groups, and devices. They also claim the Workforce Identity Cloud offers no-code identity workflow automation and orchestration.
They claim the Workforce Identity Cloud can provide enterprise-grade security for personal apps. Finally, Okta AI can detect many identity theft tactics. Okta’s Identity Cloud Customers include Zoom (ZOOM).
Will Spera add Value to Okta (OKTA)?
Okta (OKTA) is paying $100 million to $130 million for the Israeli identity security management company Spera, Calcalist claims.
Spera claims its Identity Security Posture Management platform can prevent account takeovers. For example, Spera claims the platform can contain identity sprawl, which could reduce the number of identity theft attempts.
One way Spera reduces sprawl is by improving operational efficiency. For example, the platform can reduce manual workloads, decreasing the chance of human errors and opportunities for corruption. Automated Spera processes can esure compliance with Know-Your Customer (KYC) and Anti-Money-Laundering (KYC) regulations.
For example, the Bank Secrecy Act requires US financial institutions to verify all customers’ and account holders’ identities. It also requires institutions to identity and verify account owners, understand customer relationships, develop risk profiles, conduct ongoing monitoring to identify and report suspicious transactions, and maintain and update customer information.
A federal agency called the Financial Crimes Enforcement Network (Fincen) enforces the Bank Secrecy Act. Fincen requires financial institutions to verify the identity of anybody who owns 25% of a legal entity that owns a US bank or investment account.
Thus, any US bank could be a Spera customer. Consequently, Spera could help Okta reach an enormous market. I think laws such as the Bank Secrecy Act could help Okta make money with Spera.
What Value does Okta (OKTA) offer?
Okta (OKTA) claims its platform servers over 18,800 customers with over 7,000 integrations. Okta customers include FedEx (FDX), T-Mobile (TMUS), Standard & Poor’s (S&P), Peloton (PTON), NTT Data, and Takeda.
Okta’s market is expanding because identity theft is a growing problem. The US Federal Trade Commission (FTC) 1.4 million identity theft complaints in 2023. Meanwhile, the Federal Bureau of Investigation (FBI) estimates US cybercrime losses could grow from $6.9 billion in 2022 to $10.2 billion in 2023.
Identity thieves will victimize 33% of Americans at some point, IdentityTheft.org reports. In 2021, there were 389,737 cases of credit card fraud, 395,948 cases of government documents or benefit fraud, and 197,914 cases of loan or lease fraud in the United States.
Moreover, the market for identity theft protection services, Okta’s product, could grow to $28 billion by 2029, the National Council on Identity Theft Protection claims. Thus, Okta (OKTA) operates in a growing business.
Okta (OKTA) is Losing Money
However, Okta (OKTA) is losing money. It reported a -$110 million quarterly operating loss on 31 October 2023. However, the quarterly operating loss fell from -$207 million on 31 October 2022.
Conversely, Okta’s quarterly revenues grew from $481.04 million on 31 October 2022 to $584 million on 31 October 2023. Okta’s revenues grew by 37.17% in the quarter ending on 31 October 2023. However, the quarterly gross profit grew from $343.39 million on 31 October 2022 to $439 million on 31 October 2023.
Yet, Okta’s business is growing. The quarterly operating cash flow grew from $9.98 million on 31 October 2022 to $156 million on 31 October 2023. In contrast, the quarterly ending cash flow grew from $33 million on 31 October 2022 to $40 million on 31 October 2023. In contrast, the quarterly ending cash flow grew from $234 million on 31 July 2023.
There was a $20 million quarterly investing cash flow on 31 October 2023. The quarterly investing cash flow fell from $495 million on 31 July 2023.
Okta (OKTA) is losing value
Meanwhile, the total debt fell from $2.345 billion on 31 October 2022 to $1.427 billion on 31 October 2023. Hence, Okta (OKTA) is paying off its debts. Notably, Okta reported a -$133 million quarterly financing cash flow on 31 October 2023.
Yet Okta is losing value. For example, the cash and short-term investments fell from $2.475 billion on 31 October 2022 to $2.132 billion on 31 October 2023. Similarly, the total assets fell from $9.094 billion on 31 October 2022 to $8.74 billion on October 2023.
Conversely, Okta’s share price rose from $66.27 on 20 December 2022 to $85.27 on 20 December 2023. I think Mr. Market overvalues Okta. The company is losing value, although it is in a growing business.
I recommend investors avoid Okta because I see little value in this company. I think there are far better cloud-based software-as-a-service (SaaS) stocks out there, including Microsoft (MSFT) and Oracle (ORCL). My prediction is that Okta will not deliver value for a long time.
*https://www.okta.com/workforce-identity/
*https://www.okta.com/customer-identity/
*https://www.calcalistech.com/ctechnews/article/bjhjagkda
*https://www.fincen.gov/resources/statutes-and-regulations/cdd-final-rule
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