"Those who sell this do not understand the long-term plans of this company," said TheStreet's Jim Cramer, co-manager of the Action Alerts PLUS portfolio.
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After reporting revenue growth of 68% in the quarter, Workday management provided in-line fourth-quarter guidance, while adding that fiscal 2016 sales are unlikely to be in excess of 40%.
As a result, people are "freaking out" and lowering price targets, Cramer said on CNBC's "Cramer's Mad Dash" segment. Let's not forget, this "amazing" company is still growing at an incredible rate and continues to win big contracts, he said.
However, he acknowledged that when high-growth companies lower expectations, the valuation -- and the stock price -- go lower as well.
Netflix (NFLX) is another growth stock that recently disappointed investors. Shares are down 28% in the past three months and 5.7% this year. The stock was downgraded by Stifel Nicolaus from buy to hold.
For this reason, these types of companies can't afford to disappoint investors about their growth. In Netflix's case, that means subscriber growth needs to be strong. In the most recent quarter, the company didn't deliver.
"Be careful," Cramer concluded.
- - Written by Bret Kenwell
TheStreet Ratings team rates NETFLIX INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate NETFLIX INC (NFLX) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and generally higher debt management risk."
You can view the full analysis from the report here: NFLX Ratings Report