We came across a bullish thesis on Okta, Inc. (OKTA) on Substack by Antonio Linares. In this article, we will summarize the bulls' thesis on OKTA. Okta, Inc. (OKTA)'s share was trading at $81.69 as of Dec 19. OKTA's forward P/E was 27.86 according to Yahoo Finance.
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Okta, a leader in cloud identity management, is well-positioned to capitalize on the exponential growth opportunities presented by the proliferation of AI agents. The company has spent 17 years developing a robust platform for managing digital identities, a foundational layer for businesses transitioning to the cloud. As AI agents begin to transform workflows and systems, Okta's revenue per customer could increase non-linearly while its cost structure remains relatively stable. Despite this potential, Okta is currently trading at a modest price-to-sales multiple of 5.5x, suggesting the market has yet to fully account for its transformative potential.
The company's identity management software, which enables organizations to manage employee and customer identities securely in the cloud, has historically been constrained by the complexity of integration into existing IT systems. This has slowed customer acquisition due to the "forklift upgrade" nature of deploying Okta's solutions. However, the rise of AI agents, which are expected to replace significant portions of the workforce and client base, could serve as a catalyst for Okta's growth. This shift is likely to have two key effects: a substantial increase in the number of identities managed by existing customers and an elevated importance of Okta's solutions in managing AI-powered tools.
Launched in late FY2024, Okta AI is designed to address these emerging needs. The tool operates similarly to CrowdStrike's XDR engine, generating data to train AI models that detect potential threats and respond automatically by logging out users as needed. This AI-driven approach enables Okta to continuously improve its models, creating a virtuous cycle of enhanced functionality, increased customer retention, and upselling opportunities. The accumulation of proprietary data further entrenches Okta's competitive edge, as its expanding dataset reinforces its ability to address an increasingly complex array of AI-related challenges.
This operational model resembles the "Nvidia Algorithm," a pattern observed in successful technology companies that leverage decades of development to trigger exponential growth when technological shifts align with their strengths. Like Nvidia and Palantir, Okta has positioned itself to benefit from the rising demand for computational power and advanced digital solutions. The company's recent traction with U.S. federal clients, including significant deals in FY2025, underscores its strong competitive positioning, reminiscent of Palantir's early success in securing high-stakes government contracts.