End-to-end analytics platform provider Alteryx (NYSE:AYX) is a hidden gem within the analytics and automation solutions space. I expect that more financial commentators will be talking about AYX stock in the near future. But for the time being, this stock is under the radar for many traders.
Moreover, I like to recommend stocks when they’re beaten down despite positive financial data. AYX stock definitely fits that description. It can be a tremendous opportunity when the trading community collectively sells a stock in spite of strong fiscal results.
It takes a bold spirit and a future-facing vision to invest in AYX stock. To truly believe in Alteryx, you’ll need to see a strong future for data analytics. You’d also need to go against the crowd as the stock is currently out of favor.
So, do you have what it takes to (hopefully) profit from AYX stock?
A Closer Look at AYX Stock
There’s no getting around the fact that AYX stock fell hard in early August. The sharp angle of the decline might be enough to scare away any skittish prospective investor.
And indeed, the numbers are nasty to look at. On Aug. 5, AYX stock was riding high at $178 and change. Four days later, the share price was down to just $109.23.
Unfortunately, AYX investors barely even got a “dead-cat bounce” after that. Sure, there was a slight rise in the share price in late August and early September. However, that wouldn’t last very long.
The closing price recorded for AYX stock on Sept. 18 was slightly below $108. Momentum-focused traders will probably not look upon this stock with much enthusiasm. To feel bullish about AYX, it helps to understand what precipitated the share-price drop in the first place.
Not So Bad After All
With the onset of the novel coronavirus, even the burgeoning data analytics field suffered a hard impact. Alteryx CEO Dean Stoecker basically admitted as much, noting that his company “experienced a slowdown in the second quarter driven by the global impact of COVID-19.”
With that admission, and with the post-earnings-announcement share-price drop, you might think that Alteryx’s report was a real stinker. Yet, an objective view tends to indicate that the data wasn’t actually so bad.
Let’s run down the highlights of Alteryx’s second quarter:
- Revenues of $96.2 million, marking a year-over-year increase of 17%; Alteryx had previously guided for 10% to 15% revenue growth, while Wall Street had only predicted $93.8 million in quarterly revenues
- GAAP gross profit of $86.6 million, a marked improvement over the $72.7 million posted during the comparable quarter of 2019
- 6,714 customers in total at the end of the quarter, denoting a 27% increase compared to the customer total from 2019’s second quarter
- $430.0 million in annual recurring revenue at the quarter’s end, signifying a whopping 40% year-over-year increase.
In light of all of this positive fiscal data, Stoecker maintained that despite the impact of Covid-19, “the global opportunity for analytics and automation solutions remains significant, and we believe Alteryx remains well positioned as a leader in the space.”
Stoecker certainly seems to have the data to back this contention up. So, what would cause traders to unceremoniously dump AYX stock?
Apparently, it was the forward guidance that rattled investors so much. Specifically, “Revenue is expected to be in the range of $111.0 million to $115.0 million, an increase of 7% to 11% year-over-year.”
Thus, the company is preparing for a slowdown in Alteryx’s revenue growth. Now, I can understand this disappointing guidance causing a share-price dip. But a 30% or greater crater in the AYX stock price is overdoing it.
7% to 11% revenue growth apparently isn’t good enough for some traders. Yet, slower growth is still growth. Businesses are still coping with a global pandemic. Alteryx’s CEO practically admitted this point.
The Bottom Line
Current and prospective AYX stock investors should consider the possibility that the market grossly overreacted to a realistic adjustment of the company’s expectations.
That’s a potential opportunity to accumulate shares of AYX stock as Alteryx is still growing and the revenues, albeit slowed down, will still flow in.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.