Okta's Addressable Market Is Only Getting Bigger

Following its acquisition of Auth0 and its entry into two more segments of identity software -- identity governance and administration and privileged access management -- Okta (OKTA -0.81%) now estimates that its addressable market is valued at $80 billion. Compared to just $1 billion in revenue today, that presents a huge opportunity for the company.

In this segment of "Beat & Raise" from Motley Fool Live, recorded on Sept. 1, Fool.com contributors Jeremy Bowman, Jason Hall, and Trevor Jennewine discuss Okta's impressive track record at growing the business and where the company is headed next.

Jeremy Bowman: I'll let it go. But anyway, you can see in this grid that Okta is the leader in both and the strongest strategy in their current offering, they're ahead of other peers like Microsoft, IBM, CyberArk. This adds to the bull case for Okta. They're targeting an $80 billion addressable market and they're only a roughly $1 billion in annual revenue right now. So they have tons of room to grow, fast growth rate. They're considered the top service provider in their industry and to add to what Jason was saying, too, this is the kind of company where you can let it go a bit with some of the GAAP numbers are a bit bad, I think.

Jason Hall: They're good, the context of understanding the GAAP is important. But you follow GAAP and cash flows and you look at the trends. Trevor, that's something we've talked about with just about all of these companies today, is you want to make the trends are moving, the trajectory is moving in the right direction. Let's see here real quick. I'm going to pull up Trevor, while you respond. Trevor, that was from you were trying to share from their earnings presentation?

Bowman: Yes. Let me see if I can post this in the chat, maybe it will work on your end.

Hall: Yeah, I'll see if I can pull it up. Trevor, go ahead and respond. I think I cut you off there.

Trevor Jennewine: I was actually just going to say there's a train line by my house right now so you might not be able to hear me, but it is gone.

Hall: It's sounds fine, it's a nice background noise. It sounds like rain.

Jennewine: There we go. I was going to ask Jeremy, if they mentioned anything about the two new products that they released when you're speaking with management on the Okta identity governance, or privileged access, did they say anything about adoption of those?

Bowman: Yeah, he did tell me that they have products ready to go into those markets, I think next year is the target date for that. Yeah, thanks for bringing that up. I think around the time separate from the acquisition, I believe, but I think at the most recent Investor Day conference Okta announced that they are targeting these two new addressable markets, identity governance and privileged access management. I think those are about $25 billion combined value. It also extends their growth runway and I think they are pretty well positioned. The products they have are working well. I can't remember their names, but they are transitioning them over to those new identity governance and privileged access management.

Jennewine: My understanding was that they're one of the first companies that really unify that workplace, and then on the customer side of things, and then they bring the IGA and PAM that they unify those and bolster that workplace offering that they have. I think they're one of the first companies to really offer that end-to-end solution, so I like Okta.

Bowman: Yeah.

Hall: We've got about 10 minutes left, Jeremy, I know you wanted to talk about Nutanix too, but let me do a screen share here on this link that you just sent over, and if you want to guide me to where you wanted to share. This was what you wanted to show, right?

Bowman: Yeah, that chart.

Hall: Go ahead. Here's Okta up here, right upper right? Go ahead.

Bowman: You've got to Okta on the top right there. I think they're tops in the two overall categories that Forrester is grading all these companies on. The COO told me they received the highest marks, and I think 14 of the 18, it says down near 14 of the 18 evaluation criteria. I think as far as product execution, certainly at least as far as Forrester sees that they're hitting all their marks, they're really knocking it out of the park. I think if you are an investor in Okta, this has to be reassuring to see how they compare to their competitors.