OKTA investor day

Investment Analysis Clubs Saul’s Investing Discussions
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Okta had an investor day yesterday. Here is the slide presentation. Toward the end of the presentation, they lay out their 5 year goals.

https://investor.okta.com/static-files/1a78565c-4a06-4859-87…

A couple of highlights:

  • Expect 30% revenue growth for 5 years

  • 80-82% gross margins in 5 years (74% this year thus far)

  • 16-19% operating margins (-17%)

  • 20-25% FCF target (-7%)

My thoughts:

Positives:
revenue growth and gross margins

Neutral:
much improvement planned in operating margins and FCF, but would like to see those targets higher.

Jim (long OKTA)

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Hi Jim and the board,

30% revenue growth for 5 years bothered me since Q2 they reported 57% YOY. Is that worry foolish since over a 5 year period 30% would be fantastic?

Thanks for any thoughts,
John

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30% revenue growth for 5 years bothered me since Q2 they reported 57% YOY. Is that worry foolish since over a 5 year period 30% would be fantastic?

I would take into account that they forecast numbers that they know (strongly expect) that they will beat rather than miss.
Saul

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Here are the exact words from the OKTA investor day:

“Targeting > 30% sustainable growth
in each of the next 5 years”

I read that as greater than 30% each year, not a CAGR.

So I expect growth to slow down slowly over the next few years from the 57% they are at so far this year, but staying above 30% still toward the end (5 years out). To me that is very good, the company thinks they will still be growing greater than 30% 5 years out!

They aren’t even saying it will slow down, just that they expect each year to be better than 30%. A very bold prediction when looking 5 years out.

Jim

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I would take into account that they forecast numbers that they know (strongly expect) that they will beat rather than miss.

Agreed, however, no one was more confident than homebuilders that they would beat their numbers right at the top of the market, after Q after Q of crushing estimates.

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At “only 30% each year” for 5 years the company doubles twice.

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