1 Cybersecurity Stock With an $80 Billion Market Opportunity

As far as cybersecurity stocks go, Okta's (OKTA -0.65%) business model, and specifically its addressable market opportunity, isn't well understood by many investors. In this Fool Live video clip, recorded on June 23, Fool.com contributor Brian Withers gives investors a rundown of why Okta could have far more room to grow than many think. 

Brian Withers: I will tell you a little bit about Okta. I discovered Okta when I worked in corporate. Anytime you log on, I imagine at home, you have a bunch of different websites that you log onto, Okta, what is neat is it gives identity security and make sure the right people get in the system, but it also makes it easy for the employees and authorized users to get in the system by providing them what's called a single sign-on. When I got the single sign-on from Okta, it changed my life from a log in perspective at work. It just made it so much easier to get to all of the different applications that I needed. What's interesting, what I think people are missing is people may have thought that the growth was over. Well, this is a new and nascent market and its addressable market has grown considerably since its IPO.

Initially, in 2017, they were estimating this internal identity, which they were addressing as workforce identity or what I would see as an employee and an employer. They thought the internal use cases were about $18 billion in addressable market in any given year. They said this external use case, which would be for customers accessing systems, think like Adobe, who has Creative Cloud and they have all these different applications for their customers. Adobe is an Okta customer and they've used it to make it easy for customers to log into all of their different Creative Cloud applications. Well, when they filed their 2017 IPO filing, the S-1, they really had no idea how big this external use case was, this customer identity piece was, so they didn't estimate it. Initially, it started out as about $18 billion, and a couple of years later, the CFO was interviewed in June and he said, here it is, it's very green. He reinforced the $18 billion on the workforce side, but then he let us under the covers a little bit on the customer side.

He you said it's a very greenfield opportunity. We think it's very vast, is difficult to quantify, but we think it could be as big if not bigger than the workforce market. Now all of a sudden, they've doubled their addressable market to at least $18 billion on the customer side and $18 billion on the workforce side. Soon after they started releasing this slide, which helped me really understand this identity cloud that they built for this workforce identity to give employees easy access to all the things that they need is basically the same software and the same technology that they needed to provide the customer identity stuff. Just by saying, "hey, we're going to open it up for customers," they didn't really have to do much to their code and their basic platform to address this market. That's really exciting. Now we're up to about $30. Identity is not $18 billion, it's $30 billion, and customer identity, we've actually put a number on it and it's about $25 billion. Say, in April, just a little over a year ago, they were saying it's a $55 billion market opportunity.

Well, fast forward a year to the next investor meeting, and you remember the numbers? $30 and $25. Well, they went up to $35 and $30, so the $55 billion became $65 billion, and they've expanded, they've gotten into some new technology and added new software to allow them to manage identity governance administration, I really don't know what that is, and privileged access management. But regardless, it's a $15 billion addressable market. Now their total addressable market is $80 billion. Think about 2017 when they came out with their IPO, said they were about $18 billion and they got this customer thing. Well, now it's more than four times larger and they're still tiny. I want to say they have a little bit more than $1 billion in trailing-12-month revenue. They are a small piece of this total identity market. They're the leader in the space and they are going to continue to take share.