TSP Weekly Tech Stock Update—Oct 5, 2024
This Week: DDOG rallies, MDB's performance boost, TEAM gets an upgrade, mixed views on SNOW, OpCo bullish on WDAY, Citi positive on Zscaler, Barclays ups MNDY target, Okta's enterprise success & more.
Hello from Rob…
—Shares of Monolithic Power Systems (MPWR, $935.61) have rebounded 17.5% from the September 6 low of $795.95. On Friday, the stock traded to a high of $950.99, just shy of the all-time high of $959.64 from August. Stifel raised its Monolithic Power price target to $1,100 from $1,000 after meeting with the CEO and CFO, saying the company remains the most innovative in high-performance analog, with its differentiated, complete systems-level approach.
—Following up on Coherent (COHR, $95.33), the stock this week hit a new 52-week high of $98.95, not far from the all-time high of $100.44 reached in February 2021. BofA raised its Coherent price target to $108 from $90. The firm sees a potential scenario where the company’s revenue could expand at a faster 14% to 17% CAGR from calendar 2024 to 2026, well above its current forecast of 11%, driven by maintaining a 20% to 25% share in AI optical transceivers and a cyclical recovery in non-AI markets.
—Okta (OKTA, $72.31) continues to do well at large enterprises, even as the challenging spending environment is hurting the mix of new business versus upsells.
In FQ2 (July), Okta’s fastest-growing cohort was customers with annual contract value (ACV) of $1 million+. More than 40% of the Global 2000 are customers (up from 33% less than two years ago), as they have the most challenging identity requirements.
The company now has 4,620 customers with ACV over $100k, up 10% year over year. Okta added 70 of these large accounts in FQ2, up from 65 adds in the previous quarter.
Okta’s platform strategy is working. The company is selling more products to new and existing customers—including Identity Governance and Privileged Access Management, both of which provide a nice 30% uplift on workforce identity spend. There are additional cross-sell opportunities with the new Identity Security Posture Management and Identity Threat Protection products. Customers that adopt multiple Okta products have the highest overall retention rates.
In FQ2, Okta had some notable new customer wins and upsells. A U.S. federal civilian agency that first signed up for Okta Workforce Identity Cloud as part of an initial pilot program that covered 50,000 users expanded its deployment to cover more than 300,000 employees and contractors. As more applications were onboarded to Okta, the agency experienced increased security and a better user experience, leading to the accelerated adoption across the organization.
A Fortune 500 multinational transportation company was a new FQ2 workforce ID win that included Identity Governance and Privileged Access. This company selected Okta to replace an ineffective legacy product that did not integrate well with its applications. The deployment will cover 80,000 employees and contractors. A European transportation company was a new customer ID win; the maintenance costs for its homegrown ID system had become too high.
Okta’s long-term book of business remains solid, with FQ2 total RPO of $3.505 billion rising 16%, accelerating from 14% growth in FQ1. However, the company in 2H FY’25 will face ongoing challenges, including lackluster new logo wins and seat growth (especially in the SMB space). While the stock’s low valuation should provide some downside cushion, growth stabilization is needed for a more compelling story.
*Inside This Issue: The Upcoming ERP Software Upgrade Cycle
—Paid subscribers will receive the October 2024 PDF of Tech-Stock Prospector (TSP #272) via email on Tuesday, October 8.
—Paid subscribers have access to the TSP Market Overview and TSP Portfolio Updates sections inside this issue.