We are missing something with Okta!

We are missing something with Okta! The continual refrain I hear on the board is “they are slowing down, they are slowing down, they are slowing down, I’m selling out, I’m reducing my position, I’m selling out, I’m reducing my position!” I haven’t sold out, but I have reduced my position too. It’s just a 6.2% position at present (which is certainly not a trivial position though).

However, OKTA, the stock, just doesn’t seem to care. Other companies go up and down, up and down, but Okta just seems to go up, plodding along, resting for a while near its top and then moving up again, and up another 3.5% today. When I look at my graphs it is astounding how consistent it has been. What is the market seeing that we aren’t seeing? Granted, they are “only” up 111% ytd while Zoom, Crowd, and Datadog are up considerably more, but Okta never seems to go down (granted, except in the mid-March pandemic panic when everything went down for a few days).

Here’s what they said in the August Conference Call:

During this crisis, our customers are using our platform more than ever. There was a 1-day record of over 145 million logins, and the number of unique app logins increased almost 70% to nearly 16 billion. Total MFA usage increased nearly 3x over the same period last year. These numbers reflect the massive number of new remote workers around the world and our strong growth in total customers, especially large enterprise companies.

Our ongoing focus to grow our base of large enterprise customers continues to yield results and is reflected in the addition of 105 customers with an annual contract value greater than $100,000 in the second quarter. Once again, over half of these additions were from new customers. The total number of $100,000-plus customers is now nearing 1,700. We also crossed a significant milestone and now have over a hundred $1 million customers.

In our long-term vision, we see Okta establishing itself as a standard for digital identity. In order to achieve this, we will continue to grow aggressively by adding more users, more customers, particularly large enterprise customers, expanding internationally, adding more strategic partners and increasing the use cases that come from building out our platform and accelerating the network effects. I hope that gives you a little better understanding of how we’re thinking about building Okta into the next iconic cloud company.

We couldn’t be more enthusiastic about our near-term and long-term opportunities. Having said that, we continue to be mindful that many organizations are going through incredibly difficult times, and we’re doing what we can to lend our support to the business community.”

That seems very positive to me!

Here are some figures from their earnings report:

Revenue up 43%

Subscription revenue up 44%

Remaining performance obligations (RPO), or subscription revenue backlog, up 56%

Adj operating income was $6.5 million, or 3.2% of revenue, up from a LOSS of $9.9 million, or 7.1% of revenue, a year ago

Adj net income was $9.9 million, up from a LOSS of $5.2 million.

Adj EPS was 7 cents, up from a LOSS of 5 cents.

Op Cash Flow was $10.9 million, or 5.5% of revenue, up from $1.1 million, or 0.8% of revenue. in the second quarter of fiscal 2020.

Free cash flow was $6.9 million, or 3.4% of revenue, up from a LOSS of $4.3 million, or 3.1% of revenue.

Cash was $2.5 billion.

I’d love to hear your point of view. What are we missing? Or do you think the market is wrong?



Hi Saul,

It’s true that only the paranoid survive but I dont think you are missing anything or that the market is wrong. Okta is a great company, you have just found even better growing stocks…

Personally I have not sold any Okta but I have not added either since mid 2019. It is now 11% of my portfolio. Their revenues are sticky and the TAM for employee and customer ID management is huge. The team there is consistently making further progress into this TAM and I trust them to continue to do so for many years to come.



I don’t think we are missing a thing. OKTA has shrunk to ~13% of my holdings BUT it ain’t because I sold any.


We are missing something with Okta! The continual refrain I hear on the board is “they are slowing down, they are slowing down, they are slowing down, I’m selling out, I’m reducing my position, I’m selling out, I’m reducing my position!” I haven’t sold out, but I have reduced my position too. It’s just a 6.2% position at present (which is certainly not a trivial position though).

After noting all the negativitity regarding OKTA on this board I too suspected that perhaps I had it wrong so I went back and reviewed the earnings transcripts and a few other sources to refresh my memory on the subject. FWIW I came away believing that OKTA was at least a valuable hold based on the enthusiasm, optimism and vision express by the CEO.

A more recently published transcript of a presentation by Kerrest only reinforced this view.

Okta, Inc. (OKTA) Presents at Jefferies Virtual Software Conference (Transcript)
Sep. 15, 2020 8:55 PM ET | About: Okta, Inc. (OKTA) (available on Seeking Alpha https://seekingalpha.com/article/4374555-okta-inc-okta-prese…

There is so much info in this transcript that quoting any part of it fails to do justice to the facts which are very positive…

Just a few scraps of excerpts from the presentations…

. OKTA logins are at record levels and growing
. record growth in new customers
, 99.99% up time
.increasing network effects propelled by growth in no. of new customers
.OKTA will be the the standard product for digital identity
. The "identity cloud will become one of the most important for all company operations
.projected growth for OKTA in Customer Identity Mgt,(CIAM) is huge

Finally some remarks from Mr.Offringa. OKTA is the leading provider of cloud based ID slns…far ahead of competitors with a deep moat…OKTA has a huge largely untapped TAM…reliabilti id services facing enormous demand… cutomer ID is still a smaller part of OKTA services…etc…etc…etc

I note parenthetically that the 2Q numbers were a bit weaker than 1Q but under current circumstances that doesn’t strike me as material.

So while all of this is qualitative in nature I nonetheless believe that OKTA will see very good days ahead.




I believe OKTA conference calls are well measured events, relatively speaking. The numbers are great.

This is what OKTA said on the call and explains some decline in sales.

“When large enterprise customers expand their purchases with us, they often want to align new contract start dates with existing contracts, and thus, we only bill them for the stub period before the new large contract starts. This delay of the new contract billing creates a headwind on that quarter’s billings duration, but the new contract ultimately becomes a tailwind to future quarters because of the increased contract size. As we’ve said before, our current RPO is an important metric because it eliminates these type of variances, which have no impact on revenues.”

Twilio’s said their research shows IT spend for digital transformation solutions accelerating near the end of Q2. I believe that will include Zero Trust initiatives (including SSO- my knowing that SSO sounds simple but requires deep integration into the Enterprise-extremely sticky).



I’d love to hear your point of view. What are we missing? Or do you think the market is wrong?

Saul, what is missing is comparing OKTA as an investment to any other stock that we could buy. I sold OKTA because it was slowing down, yes, but I chose to redeploy those funds into stocks that I thought would do better because, in large part, because they are growing fast (or in the case of NET because I think it will grow faster). We should always be comparing A versus B to determine where we prefer to allocate our capital based on what we think these companies will do going forward.

I sold OKTA on 7/22/2020 for about $210.
Those proceeds were put into FSLY (2/3) and NET (1/3) at about $80 for FSLY and $42 for NET.
Since then OKTA is up 15.7% while FSLY is up 59% and NET is up 28%.

I sold my remaining OKTA on 9/22/2020 for about $207.
I put the proceeds into PTON for a little under $90.
Since then OKTA is up 17.4% while PTON is up 41%.

This is just a snapshot in time but so far the decision to sell OKTA and redeploy into FSLY, NET, and PTON has been very net positive for the portfolio.



Thanks Saul for bringing Okta up as a topic. I agree that Okta just continues to execute. For just general “maintenance evaluation” of a company (did a deep dive on them before, now just “watching”), the things I look at first are, YoY Revenue growth for the last reported quarter, YoY revenue growth forecasted for the next quarter, how recurring revenue is growing (or declining), QoQ revenue growth, GM% trend, and profitability trend.

latest YoY Growth (Q2’19->Q2’20): 44%; 44% is very respectable, but we have some companies doing better, some over 50%.

YoY rev growth forecast for next quarter: 33%; 33% is fine, but seeing some deceleration. They’ll likely beat anyway but will their beat result in a YoY rev growth >44%, which would mean a ~$220M dollar quarter, representing a 8% beat? It’s definitely possible.

Recurring revenue: subscription revenue grew 48% YoY in Q1 and 44% in Q2. Trending down but might be localized.

QoQ revenue growth (Q1’20->Q2’20) 9%; comments: 9% sequential growth corresponds to a ~30% CAGR, again, respectable, but not 50% or more like some other companies we follow.

GM% trend: 75% in Q2, 73% in Q1: trend is higher, positive

Profitability trend: just became profitable, positive

All in all, Okta is executing well, but I guess, for me, there are companies that have a higher YoY growth rate, some even have accelerating revenue growth (DOCU, for example, seems to have an accelerating revenue growth rate now) and some companies have growing recurring revenue percentage. But I couldn’t fault anyone for investing in Okta. Love their CEO too. Solid company.


Saul: I’d love to hear your point of view. What are we missing? Or do you think the market is wrong?

Chris: Saul, what is missing is comparing OKTA as an investment to any other stock that we could buy.

I agree with Chris, OKTA, the stock, is competing for funds with thousands of other stocks. It’s not a question of whether the market is right or wrong about Okta, Inc., the company, but how the market rates OKTA, the stock, relative to all other possible assets it could buy. This is the reason I like comparative charts so much. As Louis Navellier puts it, “What is working on Wall Street now.” A pure investor might like OKTA better than a trader or a speculator and between them they set all prices.

Denny Schlesinger


My reasoning for moving funds from OKTA also aligns with Chris’s thoughts.

This is what I wrote earlier…
“I had bought more FSLY and DDOG from the proceeds of NET and OKTA. Both NET and OKTA are great in terms of technology and investments but I see my top 4 doing better.”


It surely doesn’t mean that I may not get back in NET or OKTA. But for now, I’m happy with my allocation and will keep a close watch.




Okay, you guys convinced me. I trimmed a little more OKTA (0.5% to bring my position to 5.7%), to add to DOCU and CRWD, which are growing faster. I obviously don’t believe Okta’s guidance though.
Thanks to all who contributed.


Gaucho Chris makes a great point. There have been better investments on the short list of holdings within the concentrated portfolios discussed on this board.

I remain LONG on OKTA. OKTA is my 9th largest position in a portfolio of 38 holdings. I own 13 tranches since January '18. But, to Saul’s point, I have not made any purchases in 2020. During the Covid Correction I deployed a significant amount of cash in search of the bottom related to most of the favorite companies discussed here. However, on a daily and/or weekly basis, OKTA never teetered under the stress of Covid enough to present an advantageous entry point.

Like ADBE, GNRC, KNSL and others in my portfolio, OKTA is a quiet, steady contributor. They still provide enough growth to secure a place on the roster and they show up to play every Sunday.


Like ADBE, GNRC, KNSL and others in my portfolio, OKTA is a quiet, steady contributor. They still provide enough growth to secure a place on the roster and they show up to play every Sunday.

I like this summary because it reflects my feelings on the subject.

Currently I have a 5.5% position in OKTA and in the past 9 months it has doubled relative to my average purchase price. I bought a bunch of FSLY in July thru Sept and NET as well, but not as advantageously
as G.Chris. IMHO to sell a big chunk of a winner like OKTA in hopes of landing a bigger winner takes an iron stomach and a willingness to move in a big way based on one or two quarters of earnings . Because I have a large short term capital gain in OKTA and an already too large tax bill I decided to keep what appears to me a strong near term grower, particularly since both my FSLY and NET are full positions.

Furthermore, OKTAs prospects are such, I think, that its day will come fairly soon.

But to each his own.




I added to OKTA in March at 96 and 107 and it has returned about 150% since then.

I read the slowing down hysteria too, and I got a bit worried so I sold covered calls against part of my position. But on the flip side, my company is expanding our OKTA usage extensively, taking advantage of all the new goodies, fully leveraging the platform for ID management throughout the enterprise.
Instinctively, I believe the WFH situation caused by the pandemic has to be a boost for OKTA, so there may be some gains yet to be harvested.


There are a handful of stocks like this. TTD and MDB continue to make new highs for example despite slowing down. Because while the growth has slowed there is nothing to indicate their leadership position has been challenged. There is nothing fundamentally wrong with the companies and there is for a 100% correlation between revenue growth and share price growth.


For me, the pivot from WFH to Customer Identity Management has been the biggest ‘change’ in the messaging from Okta leadership. The Use Case discussion has gone from turning on Okta to all of Fedex’s employees at the beginning of the pandemic (85k employees with 350 applications over a weekend) to Albertson’s use of Okta for customers to choose delivery/pickup and be recognized/personalized.

Customer Identity Management is now 24% of the business, growing at 72% Y-o-Y. Of course these numbers are baked into the financials and their guidance. The product announcement corresponded to their Showcase 2020 event which featured an analyst Q&A and led to price target increases last week.


I don’t think slowing revenue growth is such a big deal. The bigger the revenue base, the lower the growth-percentage, right? (there are exceptions, of course)

Okta is growing at 43% with quarterly revenue of $200 million. That’s not too bad. It’s not CrowdStrike, or Zoom, or DataDog, but it’s nice. And if we can believe management they have a lot of growth ahead. I think their CEO Todd McKinnon is one of the most trustworthy CEO’s in the cloud space. I trust him waaay more than George Kurtz from CrowdStrike, for example. Which is nothing I could really put in facts, but it’s just a feeling that I have and I trust it. That’s why even though CRWD has better growth numbers, OKTA has a higher allocation in my portfolio.

It seems to be a good and rewarding strategy to chase the highest growth rate. But then again, the market also rewards companies with other qualities. Take Cash Flow for example: Over the past 4 quarters, Okta made $64 million in FCF on approx. $700 million in revenue. Some other nice stats: RPO was up 56%, DBNR is stable at around 120%, they are adding around 500 customers per quarter (and growing). Plus, as some previous writers have said and most importantly to me, they are the undisputed leader in identity management.

Further, if you live in a high tax country as I do, taxes do become an issue, especially if you have gains of more than 250%. In my case, it means shaving off 20% of my whole OKTA investment if I sell. Which would be no problem if I thought that the investment thesis changed. But it didn’t, so why take the hit?

Another reason: I don’t have the time to constantly change my portfolio companies and research new stuff. So I like getting comfortable with the stuff I know and that works. I think for people like me, OKTA is really a beautiful stock to own.



There have been several one liners and also some that discuss portfolio management. Let’s please end this thread. Saul got his answer and thanked the contributors. Let’s move on.

Assistant Board Manager