Morgan Stanley is bullish on cloud software stock Okta as businesses beef up cybersecurity measures for remote employees. Shares of Okta have underperformed the market this year, down 5% in 2021 through Monday's close, compared with the S & P 500's 18.3% gain. However, Okta's underperformance makes it relatively cheap compared with peers as the stock is poised to benefit from work-from-home tailwinds, Morgan Stanley said. "While investors remain concerned due to topline slowing over the past year, we think much of this was related to a temporal shift in spending as enterprises prioritized WFH enablement and are now refocusing on larger, strategic initiatives to modernize their [Identity and Access Management] infrastructure in order to secure a larger remote workforce," Morgan Stanley's Hamza Fodderwala said. Okta is the IAM sector leader and growing its market share, according to Morgan Stanley. The firm upgraded Okta to overweight from equal weight. Morgan Stanley also hiked its price target on the stock to $315 from $275. The new projection implies 30.5% upside from Monday's close. Morgan Stanley also believes Okta's acquisition of identity company Auth0 is "transformational to the Okta story" and could drive rapid market share gains. Auth0 provides "a stronger overall moat for the combined company as their authentication service becomes the standard in app development, creating a higher barrier for new entrants," Fodderwala said. —CNBC's Michael Bloom contributed reporting.
In this photo illustration, an Okta, Inc. logo seen displayed on a smartphone.
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Morgan Stanley is bullish on cloud software stock Okta as businesses beef up cybersecurity measures for remote employees.