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Yext Down After Morgan Stanley Questions Growth Rate

Yext shares are lower after Morgan Stanley saw 'risk of another downtick in net retention and new accounting rate of return.'
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Yext  (YEXT) - Get Yext, Inc. Report shares dropped Friday after the online-brand-management company's growth rate was questioned by a Morgan Stanley analyst after a sluggish earnings forecast for this quarter.

Yext shares recently traded at $16.23, down 16%. The stock had gained 34% in 2020 through the close of trading Thursday. The Nasdaq Composite Index rose 38% during that period. 

Software shares have soared this year, as companies increase their use of data and analytics.

Morgan Stanley is the only Wall Street firm with an underweight rating on the company, according to Bloomberg.

"It’s questionable whether Yext’s Answers search product can carry the growth baton,” analyst Stan Zlotsky said in a commentary cited by Bloomberg. 

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“We see risk of another downtick in net retention and new [annual recurring revenue], as the U.S. enters more lockdowns and economic uncertainty remains high.”

In its latest earnings report Thursday, Yext posted slippage in revenue growth, ARR growth and net revenue retention, Zlotsky said. 

“Investors are likely to wait for evidence that demand for Answers can improve the trajectory of these metrics," he wrote.

For the fiscal 2021 third quarter ended Oct. 31, Yext narrowed its net loss to $22 million, or 18 cents a share, from $42.7 million, or 38 cents, in the year-earlier quarter. Revenue jumped 17% to $89.1 million from $76.4 million.

For the fiscal fourth quarter, Yext expects revenue of $87 million to $89 million and an adjusted loss per share of 8 to 10 cents. A survey of analysts by FactSet is looking for a GAAP loss of 23 cents a share, or an adjusted loss of 8 cents.