CrowdStrike vs. Okta: Which Cybersecurity Stock is a Better Buy?
January 21, 2021 at 04:26 AM EST
OKTA (OKTA) and CrowdStrike (CRWD) are two of the top cybersecurity companies in the market. Each one addresses a different market. Patrick Ryan picks which stock will outperform in 2021.
CrowdStrike (CRWD) and Okta (OKTA) are both off to solid starts to begin the new year. These cybersecurity stocks also were outperformers the last years as a result of the increased remote work.
Add in the fact that the federal government was hacked by Russian cybercriminals and investors had all the more reason to pour money into cybersecurity stocks, benefitting the likes of CRWD and OKTA. Cybercrime continues to rise sharply, while the next generation of conflict between foreign countries is increasingly taking place online.
OKTA and CRWD are two of the leading cybersecurity companies although each addresses a different need. Below, we assess each company to determine which will do better in 2021.
The Value Offering
CRWD is a trailblazer in cybersecurity, providing response services to cyberattacks, endpoint protection, and overarching digital threat intelligence. CRWD takes advantage of crowdsourced data stemming from its ever-expanding client base and combines this information with modern tech including artificial intelligence and cloud computing to pinpoint threats. CRWD's overarching aim is to prevent cybersecurity breaches.
OKTA, a San Francisco-based digital security company, provides access management solutions. OKTA’s cloud software makes it that much easier for businesses to manage and protect user authentication in applications. OKTA’s solutions also make it easier for developers to implement identity controls in applications, devices, and internet services.
CRWD and OKTA by the Numbers
CRWD was trading at a mere $62 at this time last year. The stock is currently trading around $220. However, CRWD has an elevated forward P/E ratio of 1,003.47. Of the 17 analysts who have studied CRWD, 15 recommend buying it, two recommend holding and none advise selling.
OKTA has more than doubled in a year, jumping from $125 to $260. OKTA's forward P/E ratio is an incredibly high 6,153.81. The stock is around $25 away from its 52-week high of $287.35.
Though OKTA has an insanely high forward P/E ratio and is approaching its metaphorical ceiling in the context of its prior trading range, the analysts are still bullish on the stock, setting an average price target of $272.18. If OKTA hits this level, it will have popped by more than 4%. However, it is interesting to note six of the twelve analysts who have performed a deep dive into OKTA recommend buying while the other six recommend holding.
Consider the POWR Ratings
CRWD is the winner in the context of the POWR Ratings. CRWD has an "A" grade in the Trade Grade component of the POWR Ratings. CRWD also has "B" grades in the Peer Grade and Buy & Hold Grade components. OKTA isn't as highly rated in the POWR Ratings yet the stock still has "B" grades in the Buy & Hold Grade and Trade Grade components. OKTA is ranked 22nd out of 60 publicly traded companies in the Software - Business segment.
CRWD is in the Catbird Seat
CRWD is set to raise $750 million through senior unsecured notes. The money will be used for a wide variety of purposes ranging from working capital to capital expenditures and acquisitions. All sorts of growing businesses would fit nicely with CRWD's cybersecurity services. The company's revenue is up to 86% on a year-over-year basis, hitting $232.5 million in the most recent quarter.
CRWD management anticipates revenue will spike by an impressive 78% in fiscal '21. All in all, CRWD has stockpiled more than a billion dollars of cash and cash equivalents. The company has no debt as of the latest quarter. Look for CRWD to boost its revenue all the more in the years ahead as it cross-sells its ever-expanding services to that many more clients.
Will OKTA’s Explosive Growth Continue?
OKTA's cloud identity platform has become that much more popular as a growing number of businesses connect workers to websites and apps from remote locations. OKTA's most recent quarterly revenue is up 42% on a year-over-year basis. The company's trailing 12-month free cash flow is nearly $100 million.
Though OKTA will face more competition as time progresses, it is firing on all cylinders at the current moment. OKTA's customer count jumped more than 25% on a year-over-year basis in the most recent quarter. Those questioning whether OKTA can continue to thrive should take note of the fact that the company’s contracts valued at six figures and higher are up more than 30% on a year-over-year basis.
And the Winner is…
CRWD. Demand for both CRWD and OKTA services will spike moving forward. However, CRWD’s services appear to have more potential value as cyber-attacks are on the upswing and have the potential to cripple organizations. The last thing businesses and governments want is for their operations to be rendered useless as a result of a digital attack. If you are going to choose one of these stocks based on their value offering alone, CRWD is likely the better pick.
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CRWD shares fell $226.33 (-100.00%) in premarket trading Thursday. Year-to-date, CRWD has gained 6.58%, versus a 2.74% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.CrowdStrike vs. Okta: Which Cybersecurity Stock is a Better Buy? appeared first on StockNews.com