The Okta [OKTA] share price gained 4.1% in the year to 1 September, closing at $264.76. A year of ups and downs to date saw the Okta share price 14.8% up by 12 February, but dip 18% below its opening price for the year by 8 March. While this pattern has been typical across markets, the Okta share price has struggled disproportionately, lagging well behind the Nasdaq and the S&P 500, which gained 18.8% and 20.4% respectively in the year to 1 September. Over the trailing 12 months, the Okta share price gained 17.9% compared to the Nasdaq’s 28.2% and the S&P 500’s 28.3%.
However, the Okta share price received a boost in late August. Online security stocks rose on 24 August when US president Joe Biden (pictured above) invited a clutch of big tech CEOs to a cybersecurity summit at the White House, which took place on 25 August. The Okta share price gained 10.6% from two days previously as Biden appealed to the technology leaders to “raise the bar on cybersecurity”.
Stocks across the cybersecurity industry received a boost. The First Trust Nasdaq Cybersecurity ETF [CIBR] gained 3.7% over the two days to 25 August. Okta’s share price performance has lagged behind that of CIBR in the year-to-date, with the fund having gained 16.5%, despite being its fourth-largest holding with a 6.29% weighting as of 1 September.
Will Okta’s share price stay secure?
Biden’s cyber summit was attended by the biggest names in the industry — Tim Cook, Andy Jassy, Satya Nadella, Arvind Krishna and Sundar Pichai, the CEOs of Apple [AAPL], Amazon [AMZN], Microsoft [MSFT], IBM [IBM] and Google’s parent company Alphabet [GOOGL], respectively. The meeting came in the wake of a number of high-profile cyberattacks earlier this year, including those on the Colonial Pipeline company and the meat processor JBS [JBSS3.SA]. US fuel and food supplies have been impacted as a result.
At the summit, Microsoft pledged to quadruple its cybersecurity spending to $20bn over the next five years. It also pledged to make $150m-worth of technical services available to assist governments at local, state and federal levels in keeping their security systems up to speed.
Meanwhile, Google (Alphabet) said it would spend $10bn on cybersecurity in the same period. It added a pledge to help 100,000 US citizens learn digital skills through its data analytics and tech support certificate programme. IBM pledged to train 150,000 cybersecurity professionals in partnership with historically black colleges and universities (HBCUs). Amazon said it would give the public free access to its cybersecurity training.
The increased interest in cybersecurity seems to be good news for firms like Okta. It boosted the company’s share price to a 13-week high, smashing through its 50-day moving average in the process. Despite this, analysts are still bullish on the stock, with 17 of CNN Money’s panel of 26 analysts giving a buy recommendation, and all the remaining nine recommending hold. The panel’s median price target of $290 is 9.5% above the latest Okta share price on 1 September.
Hedge funds have been buying Okta stocks over recent months. The number of Okta shares in hedge-fund 13F filings increased 2.9% from Q1 to Q2. The Vanguard Group appears to have increased its holdings during the quarter.
The future of cybersecurity
The reasons for the bullishness stem from the predicted growth of cybersecurity over the coming years. Research from Grand View Research valued the global market at $167.13bn in 2020 and projected it to grow at a compound annual growth rate (CAGR) of 10.2% to $192.70bn by 2028. Alternative research from Markets and Markets has the sector growing at a CAGR of 9.7% to £345.4bn by 2026.
The continued growth of the internet of things (IoT) is set to accelerate the cybersecurity market as it increases companies’ reliance on large repositories of data. The proliferation of cyberattacks — such as the May 2019 attack on Canva that leaked 137 million users’ confidential data — will add to the demand for top-of-the-range cybersecurity services. Cybercrime also rose during the coronavirus pandemic, as a result of the increase in working from home.
Assuming that Biden’s plan for a more security-conscious US, led by investment from the country’s biggest tech companies, is a success, Okta can expect demand for its services (and potentially its share price) to continue growing for the foreseeable future.