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Is Okta Worth a Look Right Now?

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Can this successful authentication company grow beyond its core business?

Okta (OKTA 1.62%) is a leader in multifactor authentication, but will it be able to grow fast enough to justify its lofty valuation? In this Fool Live video clip, recorded on May 25, Chief Growth Officer Anand Chokkavelu and Fool analyst Tim Beyers discuss Okta's business and its obstacles to future growth.

Anand Chokkavelu: Okta is next, and this one's easy because its ticker symbol is its name, O-K-T-A. Okta is in the identity and access-management space. We use it here at the Fool. When I try to get into, say, our Slack (WORK) channels or our internal Google (GOOGL 2.39%) (GOOG 2.36%) Docs, I have to sign into Okta first. It's a protective layer that way.

Gartner and Forrester have it as a leader for access management. Plus, in addition to that, it recently closed an acquisition of competitor Auth0. A pretty big one, $6 to $7 billion. Okta is around a $40 billion company, so that's sizable.

Note that in the access-management space, when we talked about that Gartner stuff, they had both Okta and Auth0 ranked there. They were both high on the ability to execute, and Okta was second only to Microsoft (MSFT 1.70%) on completeness of vision. Combining forces should push them further into the good on the completeness of vision. For example, you may have noticed that here at the Fool, we use Auth0 for our sign-on access to our website now that we'll all be one company.

Its co-founders are CEO Todd McKinnon and COO Frederic Kerrest. They both have Salesforce (CRM 1.69%) pedigrees -- it's where they met up -- and they both have meaningful ownership stakes, 3.5% and 1%, which gets you well into the millions, or billions in the case of Todd McKinnon.

The only thing to ding Okta, I think, is valuation. It's part of the 40/40 club. This isn't baseball, so it's not a good thing. It's around $40 billion in market cap and around 40 price to sales. Another 40 is its 43% one-year sales growth, which is pretty good. But as you see, there are some faster growers.

Tim, did I miss anything? Matt?

Tim Beyers: I don't think so. My main concern with Okta is that it's primarily lived in identity and access management, and it wants to get beyond that. It's definitely got some good partners. It has good management. There has been amazing growth.

But I've not seen enough. I'm the rare Fool who is not skeptical of Okta, but I'm not fully aboard the Okta train the way some others at the Fool are. I think the reason for it is just that I believe that this is primarily an identity-management story, and getting beyond that is going to be really, really difficult.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Anand Chokkavelu, CFA owns shares of Salesforce.com. Matthew Frankel, CFP has no position in any of the stocks mentioned. Tim Beyers owns shares of Alphabet (A shares), Alphabet (C shares), Salesforce.com, and Slack Technologies. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Microsoft, Okta, Salesforce.com, and Slack Technologies. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Okta Stock Quote
Okta
OKTA
$104.15 (1.62%) $1.66
Microsoft Corporation Stock Quote
Microsoft Corporation
MSFT
$291.91 (1.70%) $4.89
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$121.68 (2.39%) $2.84
Salesforce, Inc. Stock Quote
Salesforce, Inc.
CRM
$189.89 (1.69%) $3.16
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOG
$122.65 (2.36%) $2.83
Slack Technologies, Inc. Stock Quote
Slack Technologies, Inc.
WORK

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