Markets

Why Okta's Shares Dropped 9.6% on Thursday

What happened

Shares of Okta (NASDAQ: OKTA) fell as much as 9.6% in trading on Thursday after the company reported fourth-quarter 2021 results. The stock closed down 6.2% on the day, following yesterday's 6.9% decline.

So what

Last quarter, revenue jumped 40% to $234.7 million, and net loss was $75.8 million, or $0.58 per share. On an adjusted basis, which pulls out one-time items, the company made a profit of $8 million, or $0.06 per share.

In fiscal 2022, management said they expect revenue growth of 29% to 30% to $1.08 billion to $1.09 billion, and a loss of $0.44 to $0.49 per share.

Graphic of a finger print on a computer chip.

Image source: Getty Images.

The guidance brought out a number of downgrades from analysts, who were disappointed by the slowing rate of growth. Piper Sandler cut their price target from $250 to $235, keeping a neutral rating, and BMO Capital Markets lowered their price target from $285 to $265, but kept an outperform rating.

Now what

The market may not be happy with Okta's results, but the business is still performing very well. Growth of 40% last year is great, and guidance for another 30% increase in revenue next year is keeping the momentum going.

But with growth stocks, any reduction in the expected growth rate of the company can cause shares to plummet. That's why Okta is down today. However, the company is growing by double digits and has a very sticky business model, so this is a stock investors should buy and hold on to for the ride, even if it's a little rocky from time to time.

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Travis Hoium has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Okta. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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