Okta rises after Q1 FY2020 earnings and Wall Street is excited

On Friday, Okta, the identity company, saw its stock rise as high as 12%.

Okta reported its earnings on Thursday, where it reported a revenue of $125.2 million — rising 50% from the previous year and beating Wall Street's expectations.

Analysts say that its new products, as well as its acquisitions of ScaleFT and Azuqua, will help the company keep growing.

Read more on the Business Insider homepage.

Okta's stock rose as high as 12% a day after it reported its quarterly earnings — results that show “excellent momentum” for the nearly $13 billion company.

On Thursday, Okta reported a quarterly revenue of $125.2 million, a rise of 50% from the previous year, and well ahead of Wall Street's expectations of $116.86 million.

Okta topped analyst expectations for next quarter too. Okta is predicting a revenue of $130 to $131 million, while Wall Street expected it to project $127.54 million.

With all that, it's no surprise that Okta's stock rose about 6% after hours on Thursday, and even higher still on Friday.

“The results are even better than we anticipated,” Jonathan Ho, partner at William Blair, told Business Insider. “That's reflected in the stock moving up. Importantly, the companies talk about success and new opportunities which helps drive the case for further upside. The company seems to be doing better at winning more.”

What Ho means is that Okta has been adding more products, in addition to its core identity and access management product, which could lead to further growth. He says that Okta, which competes with the likes of Microsoft's famed Active Directory, is still in the “early innings of its growth opportunity.”

“It helps sustain the growth profile for a longer period of time,” Ho said. “If they grow bigger and they only have one product, the growth will have to slow. Now it looks like it can continue longer.”

A “really big” market

Okta's subscriber base grew by 52% from this time last year. Now, Okta has over 6,550 customers — 104 of whom pay over $100,000 a year, the company disclosed in its earnings report.

“The market we're in is really really big. We're really happy with the growth,” Okta CEO and co-founder Todd McKinnon told Business Insider. “Part of it is just the business model that is just recurring subscription revenue. It allows us to grow very quickly.”.

In the past quarter, Okta launched Okta Access Gateway, which allows companies to use the company's tools to log into on-premise apps, which Ho predicts will grow in us, given that many enterprises still rely on legacy software.

Read more: $9 billion Okta started in the cloud, but it's extending into the data center for the first time to reflect the 'reality' of what customers need

Terry Tillman, managing director at SunTrust Robinson Humphrey, agrees about Okta's expanding market opportunity, especially as the company invests in international expansion in Asia and Europe.

“They've been organically building new products,” Tillman told Business Insider. “They're adding more products where they can drive revenue for a long period of time.”

Ho said that Okta is already seeing strong traction from ScaleFT, a server protection company that Okta acquired last July. Okta also announced in March that it will acquire an automation software company called Azuqua, although it's still too early to see results.

Still, Richard Davis, managing director at Canaccord Genuity warns that while the company has “excellent momentum,” it's possible that Okta will enter a period of dormant stock prices as investors have high expectations.

“Indeed, this is something we will monitor with a microscope over the coming quarters,” Davis wrote in a note. ...For the time being, investors crowd into stocks of companies that have long tails, predictable growth prospects, and Okta fits that description.