Okta Inc. (OKTA)

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Okta Still Too Frothy For My Liking
By: Seeking Alpha | January 22, 2020

Summary

• Revenue growth is 45+%, and FCF has turned positive.

• Okta has a very lofty valuation when measured by forward sales multiple.

• The share price hasn't participated in the recent market bullishness for software companies.

• Based on expensive valuation and lack of price action, I remain neutral.

The last time that I checked in on Okta, Inc. (OKTA) was back in June of last year. In the article "Okta: If You Have To Ask, You Can't Afford It," I concluded that although the company appears to have a very bright future, the stock was extremely overvalued. Thus, I gave the company a Neutral rating. Okta stock has appreciated 3% since the article was published, whereas the S&P 500 is up almost 14%.

Today, I am back to check up on this high-growth SaaS company and it appears that not much has changed, although I am softening my position on valuation somewhat by considering forward earnings estimates instead of forward sales estimate. Doing so eases my concerns regarding valuation, but a high level of SG&A expenses and lack of stock movement while other software stocks are breaking out keep me on the sidelines. I am retaining my Neutral rating on this stock.



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