1 Fast Growth Stock To Buy On The Dip

In the world of cybersecurity, Okta is synonymous with secure identity management but even the protector sometimes needs protection. The leader in identity and access management suffered not one but two high-profile breaches over the span of a single year, creating a nightmare scenario for investors.

As a leading cybersecurity company specializing in identity services, it had fallen victim to a security breach and Okta shares plummeted by 11-13% on the news. Hackers had infiltrated the company’s support-case management system and accessed customer files.

Interestingly, this is the second time this has happened in less than a year. For a firm that champions security, this is a serious chink in the armor. After all, confidence is the currency of the cybersecurity world.

A company whose services are pivotal for protecting sensitive and high-value data cannot afford to lose it. In the eyes of customers and investors alike, Okta’s efficacy as a reliable protector is now up for debate, especially since this is the second such incident. In the cybersecurity world, a damaged reputation correlates to market share loss, and it has.

Key Points

• Okta suffered two high-profile breaches in the past year, raising concerns about its ability to protect its own systems and those of its clients.

• The company’s ability to recover from these breaches will depend on how it addresses the security concerns and restores trust with its customers.

• While a discounted cash flow forecast shows massive upside potential, customer churn will be the ultimate arbiter of what the future holds for Okta.

What Is The Real Cost of Data Breach?

In this most recent security incident, Okta’s Chief Security Officer, David Bradbury, stated that an “adverse actor” had stolen a credential to gain unauthorized access to the company’s support-case management system.

The compromised system is separate from Okta’s main system, which is still fully operational. Bradbury clarified that all impacted customers had been notified and no other users had been affected.

So, what should you make of this? For starters, the compromised system was not directly related to Okta’s primary services, an important fact that could limit long-term damage to the company’s core operations. But, the actual cost may lie in the potential loss of consumer trust.

After a breach in early 2022, which Okta failed to report for over two months, this new incident does nothing to help rebuild that trust with shares plunging by over 11%.

Is It Time to Buy the Dip?

While it’s still too soon to gauge the full extent of the damage, this breach undeniably dampens confidence in Okta’s ability to safeguard its own systems, let alone those of its clients. How Okta plans to resolve this issue is now crucial to the decision to buy the dip or to sell.

No doubt, this decline presents investors with an opportunity to scoop up a stock on sale. Fair value sits at $103 per share according to a DCF calculation. But there’s more to this breach than meets the eye.

The real metric to watch is how Okta’s client base reacts in the coming quarters. Will they see client churn, or will the company’s actions restore faith? The answers to those questions will determine Okta’s fate and future value.

Final Thoughts

It’s worth noting that Okta provides identity services to high-profile clients, including Microsoft-backed OpenAI. While the breached system is separate from Okta’s primary services, it raises questions about the level of security Okta can offer to such significant partners.

In the grander scheme of things, Okta’s breaches are a sobering reminder of the vulnerabilities inherent even in companies that make it their business to protect others.

Above all, investors who are tempted to buy the dip should keep an eagle eye on customer churn.