The Okta Inc (NASDAQ: OKTA) stock price jumped 5% on Friday after the cybersecurity and workflow management platform served up first quarter FY23 results that were much stronger than I — and most other analysts — had expected.
Okta shares were up 10% during Thursday’s trade and a further 17% in after-hours trade before settling 5% higher.
Okta stock price
On the investor call, which — as usual — I found very balanced, CEO and co-founder Todd McKinnon told analysts that the “security incident” involving LAPSUS$ resulted in virtually no impact on the company’s customers but did impact management focus. McKinnon and senior management spoke with over 1,000 customers. CFO Brett Tighe reported that renewal rates were at or near record levels (and seemed surprised).
Okta’s future looks be sticky
Importantly, the company remains firmly focused on delivering enhanced value to developers (through Okta and Auth0) and enterprise customers, by further entrenching itself in workflows.
Okta remains committed to its $4 billion of revenue and 20% free cash flow (FCF) margin target by FY26 — that’s $800 million in annual free cash flow.
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Key drivers of the Okta stock price
For me, the great thing about this quarter for Okta was the addition of 800 new customers despite the ‘security incident’.
It’s also great to see dollar-based net retention (DBNR) remaining over 120% — signalling increased stickiness from the core platform.
While the company continues to spend big on R&D and marketing to acquire new customers — it’s something I’ll watch — this was a reassuring result from a proven compounder and aligned management team.
While I’m aware of increasing competition and a stretched valuation (Okta has to achieve a lot of growth to justify market-beating status) I’m confident Okta will be a much bigger business in 3-5 years.
