Over the past two months — on the heels of an apocalyptic post-earnings wipeout — I’ve been saying time and time again that Alteryx (NASDAQ:AYX) isn’t just a great buy, but one of the best stocks to buy in the whole market for the fourth quarter of 2020! That’s based on the idea that management’s dour third-quarter guide, which caused Alteryx stock to fall off a cliff back in August, would ultimately turn out to be exceptionally conservative.
Those bullish calls are proving prescient.
In early October, Alteryx significantly raised its third-quarter revenue guide from $113 million (9% year-over-year increase) to $127 million (23% year-over-year increase), and AYX stock popped almost 30% in response.
Since early August, shares are now up nearly 35%.
This rebound rally in AYX stock is far from over. The reality is that this long-term winner is now back on a winning trajectory, and that robust business momentum over the next several quarters will carry AYX stock all the way back to $200.
Here’s a deeper look.
Alteryx Stock: Data Is the Future
Data is the future of the business world.
Gone are the days of unreliable gut feelings and error-prone decision making. Here are the days of reliable metrics and data-driven decision making.
This pivot really isn’t hard to comprehend. Say you have two apparel brands:
Brand A has a ton of data on its customers and what they want. Brand B does not. Brand A leans into that data to create products which the customer is inclined to like, while Brand B takes shots in the dark at creating products the customer may or may not like. Brand A sells a bunch of product. Brand B doesn’t. Brand A ultimately takes over the market and puts Brand B out of business.
This is happening, everywhere, all the time, and across all industries.
Companies with data are dominating companies without data.
Thanks to competitive dynamics and capitalism, every company in the world will inevitably be forced to turn into a data-driven organization over the next few years … or else they risk simply being pushed out of the market by competitors.
I like to broadly call this pivot towards data-driven decision making as the emergence of the Intelligence Economy — since it’s, quite literally, just companies using intelligence to improve economic outcomes.
Data science platforms like Alteryx — which provide the analytics and tools to empower data-driven decision making at the enterprise level — are the heart of this burgeoning Intelligence Economy.
Alteryx Is a Leading Data Platform
As data-driven decision making becomes ubiquitous across the enterprise over the next several years, data science platforms will become equally ubiquitous.
Why? Because data is no good if you can’t analyze it. You need to be able to transform clunky, large CSV and Excel files into actionable insights in order to glean value from the data, and truly benefit from the Intelligence Economy (or, again, you risk being run out of business by someone who does).
Alteryx provides an end-to-end platform which does just that — gives enterprises the analytics and tools necessary to turn raw data into insights.
Importantly, Alteryx does this in a friendly, low-code, easy-to-learn and easy-to-use software environment. That is, you don’t need to be a data scientist or have a computer science degree in order to make use of the Alteryx platform. Alteryx enables regular Joes to make advanced data-driven decisions.
That’s big, because most companies don’t have big data skills. All the data scientists in the world are going to work for Facebook (NASDAQ:FB) and Microsoft (NASDAQ:MSFT), while only 6% of large companies and very few small businesses employ even a single data scientist.
So, as we pivot into the Intelligence Economy, most companies are going to lean into low-code, easy-to-use data science platforms to help them make data-driven decisions.
Alteryx is the best-in-breed stock in this world — and, to that end, the company is going to sell a lot of enterprise seats to its data science platform over the next several years.
Business Momentum Is Rebounding
The big knock against AYX stock in recent months has been that the company’s business momentum all but died during the Covid-19 pandemic, as enterprises cut back on discretionary spending.
Alteryx — normally a 20%-plus revenue growth company — reported just 17% revenue growth in the second quarter, and originally guided for 9% revenue growth in the third quarter.
But, as the U.S. economy has normalized and enterprise spending has rebounded, Alteryx’s business momentum has recovered, too.
Management now sees revenues growing by 23% in the third quarter, with the implication being that fourth quarter revenues will probably rise by more since business momentum is picking back up.
Thus, it appears that Alteryx is back to being a 20%-plus revenue growth company.
With huge revenue growth once again at its back, AYX stock is ready to get back to its winning ways.
Alteryx Stock to $200?
My numbers suggest AYX stock has upside to $200 over the next 12-plus months.
Thanks to secular big data tailwinds, built-in Alteryx platform advantages and tremendous scalability inherent to the company’s software business model — which features 90% gross margins — I’ve long held the belief that Alteryx is a 10%-plus revenue growth company 15%-plus profit growth potential over the next five to ten years.
I’m slightly upping those estimates to account for a quicker-than-expected revival in the company’s business momentum in the second-half of 2020, which has pushed up my estimates for every year post-2020.
Bottom line, I’ve raised my 2030 earnings per share target for Alteryx from $8.45 to $10.15. Based on a 35-times forward earnings multiple and an 8.5% discount rate, that implies a 2021 price target for AYX stock of nearly $185.
Bottom Line on AYX
Alteryx stock is a long-term winner that lost its mojo for a while, but is now getting that mojo back.
So, stick with the rally AYX. Below $150, the stock still offers attractive upside potential over the next few quarters.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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