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Alteryx: Wait For The Dust To Settle

May 08, 2020 11:00 AM ETAlteryx, Inc. (AYX) Stock20 Comments
Gary Alexander profile picture
Gary Alexander


  • Shares of Alteryx pulled back nearly 10% after the company reported Q1 earnings results.
  • Revenue growth decelerated to 43% y/y in Q1 (from a blistering 75% y/y in Q4), and Alteryx expects deceleration to worsen in Q3 to the mid-teens.
  • The company has cited the coronavirus as a big headwind, as companies delay large and expensive IT projects like Alteryx.
  • Even with its post-earnings fall, Alteryx has recovered ~40% from its March lows and remains fairly valued at ~11x forward revenues.

Alteryx (NYSE:AYX), a software vendor best known for its data integration tools that help business users pull together various streams of data into a single platform for seamless analysis, has long been one of the fastest-growing companies in the software sector. And besides being prized for its growth, Alteryx exhibits one of the highest gross margins in the software sector as well as rich free cash flows - which, prior to the spread of the coronavirus, made Alteryx one of Wall Street's darlings in the sector.

The upheaval caused by the coronavirus, however, has altered the company's growth trajectory. Alteryx is famous for being an expensive IT solution, and also one that many customers purchase on an upfront (and not recurring) basis. This has proven to be a major headwind as the lockdowns continued and businesses pulled back on non-essential IT spend. Post-Q1, we can now see the impacts of the coronavirus on Alteryx's business, and shares have lost nearly 10% as a result:

I was a longtime Alteryx bull. Though I typically shy away from software stocks with high valuations, Alteryx provided the rare combination of companies that could grow rapidly while expanding profit margins and cash flows at the same time, while also being a category leader in a critical and nascent area of infrastructure software that was seeing secular tailwinds from the growing trend toward "data-driven decision making." After seeing Alteryx's latest results - and particularly, its dour outlook for Q2 - I now think the stock is fairly priced.

We note that while Alteryx is still down roughly 30% from highs notched in February, the stock has turned positive for the year, even after its post-Q1 fall. At current post-earnings share prices of ~$114, Alteryx trades at a market cap of $7.47 billion. Netting out the $991.9 million of cash and $706.1 million

This article was written by

Gary Alexander profile picture
With combined experience of covering technology companies on Wall Street and working in Silicon Valley, and serving as an outside adviser to several seed-round startups, Gary Alexander has exposure to many of the themes shaping the industry today. He has been a regular contributor on Seeking Alpha since 2017. He has been quoted in many web publications and his articles are syndicated to company pages in popular trading apps like Robinhood.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (20)

I think 14 times sales isn't over priced with their growth rate. It's volatile (I'm long for 2 years) and can be unsettling to hold through the down swings but this is a quality company with an incredible software. In direct comment on your piece, the 10% decline didn't last very long (it rarely does with this stock) so if anyone jumped in, congrats. I missed it by waiting 2 days but already have a position so will hope to move quicker next time. The effect of the virus is the biggest concern as businesses may make serious cuts to their spending. I wish they had explained a little more on the deceleration but I'm holding for now and willing to give it more time.
way overvalued like most.stocks. i will wait.for second wave of corona befor.buying this.one
I'm long AYX but bothered by the fall from 78% revenue growth in Q1 '19 and 159% in Q4 '19 to 43% in Q1 '20 and of 10-15% growth in Q2 '20.

It's hard to tell exactly what's going on. Is the company being overly conservative with Q2 estimates? Is it really all attributable to Covid impact on customer spending? Is something else going on, like competitors offering more attractive solutions?

Net retention is still pretty good at 128% - though on a long term decline from very high levels - so I don't think it's the latter but it's hard to know for sure. The company had already guided for significant 2020 deceleration to 33-35% back in Feb - which is still pretty solid and which the market absorbed at the time.

Not sure what to make of the prospect of 15-20% growth for the foreseeable future. Seems like I'm betting on a re-acceleration story tied to a quick Covid rebound in hard-hit industries... not good IMO.

I read the opinions of multiple experts and I haven't heard any suggestion of competition. the slow down seems to clearly correlate with the onset of the Covid-19 pandemic. The recent rebound in price may be due to an optimistic tone in the CC regarding April business and that their guidance was "conservative" based on all the unknowns. AYX shares may be volatile for awhile and it's probably best to just ignore the ups and downs in the near term.
It's actually incredibly easy to tell what's going on. The business had a temporary shock from the virus (shocker, I know).
CWatsonSD profile picture
"I typically shy away from software stocks with high valuations.."

This has been a great investment for many but those words pretty much sum up my personal thoughts about AYX. It has been on my watch list for over a year. I believe ZACKs is one of the many that loves them as well. Best to all of you with this one.
Crazy market. Weak guidance. Drops about 20% (after hours). Now it's back up 25% from that low. I'm long but previously sold a few out of the money 130 calls which might decrease my position modestly. The market's volatility is insane these days. Why did AYX drop to $75 anyway if it was going to hit $130 again after the expected weak earnings report?
Aspiring Penguin profile picture
market is volatile due to lots of speculation. lots of short sellers. lots of people cashing out of fear.

TWLO tripled in value in just a month and half off its low back in March. A lot of people made a wrong bet (short) and got creamed.
Thanks for article.
April the biz already back to normal
meridian6 profile picture
Well summarized. Am really surprised at all these investors who ignore deteriorating fundamentals. Valuation matters and pigs get slaughtered.
Reading the tea leaves from the earnings call suggests March was the bottom. 2H snapback coming in a very seasonal business. Long and strong.
Aspiring Penguin profile picture
high quality stocks shoot thru the roof relentlessly, when all smoke clears. best time to buy is when it dips, largely based on macro headwinds.

don't think too much about getting in at the best possible price. you can't. what matters is you invest in high quality stocks, and stay long for long term. that's how you make dough.

all I will say is AYX is a good value at today's prices. I suspect it will double a year or two from today.
Uhle profile picture
Investing is about the long-term. There will be some nasty earnings reports for Q2 but as we all know the market trades the future. The sell-off was the reaction to the new guidance for Q2. The worst regarding Covid19 should be over and the stock pulled back as you mentioned.
The growth will reaccelerate in the following quarters to come. I loaded up on the dip because I invest - I dont trade.
It's already back up to $124... ver volatile right now.
yeah, wait until it's back to $160 before thinking about an entry.
ccp4u profile picture
All these comments are valid and risk is always there. I added after hours on the pullback and am currently up 14% on that tranche. We all expected shocks from this...but leaders in a space will always snap back quickest and opportunities to buy are fleeting. Will always evaluate and measure the risk...but the greater risk on AYX in the current recovery cycle is being short or on the sidelines.

Yeah you're up because the market is up (insanity on these horrendous Jobless Claims and now Unemployment /Non-Farm. I'd think seriously about selling and taking the profits, and then wait it out, as the author states.
If you try and time the market with stocks like Ayx you will get left behind.
I sold a bit pre-earnings, bought back in on the dip, watched it recover all day yesterday, and then further up today. I sold what I'd bought today, as I'm overweight on AYX.

Yes, I think the market is over-optimistic. Sitting on about 10% cash (which I never do) and will sell off slowly if the market keeps going up.
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