What happened

Shares of Okta (NASDAQ:OKTA), the cloud-based identity-management specialist, were moving higher last month as investors continued to pile into SaaS (software-as-a-service) stocks. The company also got a boost from some positive analyst commentary during the month and a strong first-quarter earnings report at the end of May. According to data from S&P Global Market Intelligence, the stock finished May up 29%.

As you can see from the chart below, the stock gained steadily over most of the month.

^SPX Chart

^SPX data by YCharts.

So what

Okta has been one of a number of cloud stocks to surge since the market bottom in March; investors believe that it is benefiting from the work-from-home transition that's taken place across the country since the pandemic started. Indeed, management lifted its bottom-line guidance in April because it's saving on costs related to travel and marketing, though it did warn about some minor headwinds in billing, mostly with small and medium-sized businesses due to the impact of the pandemic.

CEO Todd McKinnon and COO Frederic Kerrest and Okta's IPO

Image source: Okta.

On May 13, the stock rose as Cleveland Research analyst Ben Bollin said his research was showing strong growth in Okta license sales in the quarter and acceleration in the shift to the cloud, and other analysts raised their price targets on the stock later in the month.

Okta finished out the month with a 6% gain on May 29 after its earnings report came out. The company easily blew past its own guidance: Revenue jumped 46% in the quarter, and its adjusted per-share loss narrowed from $0.19 a year ago to $0.07, which was well ahead of analyst expectations at a per-share loss of $0.17.

CEO Todd McKinnon said, "Okta is at the forefront of helping organizations adapt to the current environment where secure remote access has become a top priority across industries."

Now what

Okta's guidance for the second quarter was characteristically conservative, with a forecast of 32% to 33% revenue growth, but the company made it clear that it's poised to gain from the acceleration in remote work as password security and related needs become more essential. The stock might be expensive based on traditional metrics, but Okta is chasing a $55 billion market opportunity. Unless its growth suddenly slows, the stock is unlikely to fade.