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Shares of Okta (OKTA) have risen 18% since the company delivered strong fiscal Q4 results in late February. Despite a major security incident last year, the stock is up 13.7% year-to-date, outperforming the Nasdaq Composite. The breach, in which hackers accessed the support case management system, caused Okta shares to drop in November to a new 52-week low of $65.04. Since then, Okta has made significant security enhancements to protect its systems, including changes to access provisioning and implementing multi-factor authentication.

Investors were concerned heading into Okta’s FQ4 earnings report that there would be a negative impact from the breach. However, Okta surprised to the upside with total revenue increasing 19% to $605 million, exceeding consensus estimates. The company also signed a record number of large contracts with over $1 million in annual recurring revenue. Okta’s total customer count rose by 8% to 18,950, and the number of large customers with an annual contract value of over $100,000 increased by 14%. Total remaining performance obligations (RPO) grew by 13% to $3.385 billion.

On the FQ4 earnings call, Okta CFO Brett Tighe stated that the security incident had minimal impact on the company’s financial results. The company experienced a strong cross-sell motion and saw an increase in the average contract duration due to larger customers signing extended contracts. Looking ahead to FY’25, Okta’s new business pipeline was stronger than the previous year, according to CEO Todd McKinnon. For FQ1, Okta provided total revenue guidance above consensus estimates and expects continued growth in RPO.

Despite the security breach, Okta remains optimistic about its future growth prospects. The company’s FY’25 total revenue outlook indicates modest growth of 10% to 11%, which may be conservative. Some traders and institutional investors are confident in Okta’s ability to rebound from the breach and capitalize on opportunities in the identity and access management market. With recent improvements in security measures, Okta’s potential to gain market share in a large and growing industry is significant.

As the impact of the security breach diminishes, Okta’s focus on expanding its presence in the identity and access management market becomes clearer. At current prices, Okta’s enterprise value is attractive relative to revenue estimates for FY’25 and FY’26. The company’s growth outlook shows acceleration in the coming years, indicating that investors have confidence in Okta’s ability to overcome challenges and deliver strong financial performance. Institutional buyers are betting on Okta’s ability to leverage recent security enhancements and drive growth in a lucrative market.

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