What do these three companies have in common -- other than the fact that their stocks are up 15.6%, 12.5%, and 11.9%, respectively, as of 11:45 a.m. EDT today?
Zscaler helps connect remote employees to software-as-a-service applications. Okta provides "identity solutions" to government and business, using cloud-based systems to verify identities and secure access to critical IT infrastructure. And Slack is rapidly becoming one of the most popular means of collaboration and communication for workers both inside and outside the corporate office.
In short, all three of these companies are in the "work-from-home" business -- and in the age of coronavirus, this is a great business to be in.
Across the country, from San Francisco to New York, governments are following the lead set by companies like Google and Microsoft earlier in this crisis and instructing "nonessential" employees to work from home. This is a good idea, promoting "social distancing" and whatnot and making it easier for folks to earn a living while enduring scattered 14-day quarantines. But employees need tools to work from home. Providing these tools is likely to become a more and more significant source of revenue for Okta, Zscaler, and Slack as this health crisis drags on.
Thus the coronavirus crisis is turning out to be an opportunity for these companies -- an opportunity to prove to investors that they are able not just to grow their revenues rapidly, but also to make money doing it.
After all, last year Okta grew its revenues an astounding 47% from 2018. Zscaler grew 48%, and Slack 57%. As of yet, however, none of the three companies is profitable according to generally accepted accounting principles (GAAP) -- although, to give credit where it's due, Okta and Zscaler are at least generating positive free cash flow. If they're to prove themselves worthy investments for investors, at some point they need to turn the corner and start converting all these revenues they're reaping into honest-to-goodness profits.
Coronavirus could offer the opportunity for these companies to finally reach critical mass and make that happen -- and today, at least, that's what investors are betting on.