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Why Okta Stock Jumped This Week

By Jeremy Bowman – Oct 14, 2021 at 4:41PM

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The cloud stock was climbing after the company held a customer event.

What happened

Shares of Okta (OKTA 1.99%) were rallying this week as investors responded positively to announcements at its annual Showcase event and as the cloud identity software company seemed to get a tailwind from falling interest rates.

The stock was up 11.8% for the week as of the market close on Thursday.

A bar chart made of clouds going upward.

Image source: Getty Images.

So what

Okta put up solid gains on Tuesday, Wednesday, and Thursday as the 10-year Treasury yield fell from 1.61% to 1.52%, which favors growth stocks as it makes discount rates more attractive for stocks with long-dated earnings, or profits in the distant future.

What was more material for investors was the news out of the Showcase event, where the company announced some new and improved products. Investors responded positively, sending shares up 5% on Wednesday and another 3.4% on Thursday.

Showcase was Okta's first such event since it acquired Auth0, a customer identity access management (CIAM) company in May, and it gave management an opportunity to show off the new integrated Okta. The company added several new capabilities to Okta's CIAM offering, including device authorization grant, branding, and custom administrator roles, which help companies ensure that their customers can securely and seamlessly register and log in. The company also said that Okta Workflows would become a stand-alone offering, separate from its Lifecycle Management product, and that Auth0 was now available on Microsoft Azure, one of the biggest cloud infrastructure platforms available.

The update earned plaudits from at least one analyst as Piper Sandler's Rob Owens said he sees "a meaningful opportunity ahead" for the company in CIAM, though he maintained a neutral rating and a price target of $250 for valuation reasons.

Now what

The Auth0 acquisition further establishes the company as the independent leader in identity and should accelerate its growth as it tackles an $80 billion addressable market, which compares to just $1 billion in trailing revenue.

As Owens notes, the cloud stock is expensive but the company's future is bright and its execution has been flawless thus far, which should give investors confidence.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Jeremy Bowman owns shares of Okta. The Motley Fool owns shares of and recommends Microsoft and Okta. The Motley Fool has a disclosure policy.

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