Alteryx (NYSE:AYX) is focused on cloud-based data analytics software. That’s pushing two big buttons for business. Everyone wants to move to cloud-based tools, which are easy to deploy, easy to scale up and remotely accessible. Data analytics is seen as being critical to gaining customer insight and helping businesses rapidly solve problems. That combination, along with its rapidly expanding market share, explains why AYX stock saw booming growth after the company went public in March 2017. Since then, Alteryx shares have increased in value by 662%.
However, about 15 months ago, the rollercoaster ride began for investors. Since August 2019, Alteryx stock has taken investors on a wild ride. Rapid gains to new highs have been quickly followed by steep declines.
The latest cycle began on Oct. 9. After closing at $151.97, AYX began to slide. Now in the $118 range, it’s lost 22% in five weeks. Is it about to bottom out and start climbing again? More importantly, will AYX break out of this cycle and go back to being a growth stock — or is the turbulence going to continue?
A Growing Market
Data analytics is a high-growth category, as more and more businesses adopt tools like those offered by Alteryx. Technology giants dominate the market for “big data” analytics. However, there is also strong demand for predictive analytic tools among smaller companies and businesses. This is where Alteryx has been making headway.
A 2019 report predicted that the market would grow by $1.94 billion between 2019 and 2023. In the third quarter, AYX calculated that it currently owns just under 38% of this market.
Alteryx has also increasingly focused on winning business with big companies, a move that offers the opportunity for increased growth — although it brings the company into direct competition with much larger adversaries.
Pandemic Speed Bumps Accelerate the Rollercoaster Ride
Up until August 2019, AYX stock had shown remarkably steady growth. At the end of that month AYX suddenly dropped. There was no apparent direct cause, other than a general market-punishment of cloud computing stocks. By Feb. 14 of this year, it had not only recovered, but closed at $158 — a new all-time high.
Then the bottom fell out again as the pandemic and subsequent stock market crash pulled the rug out. By March 16, AYX was below $81. Recovery was quick and AYX went back into growth mode. On July 9, it closed at $181.98, another all-time high. There were hopes that struggling companies would adopt data-analytics solutions like those offered by Alteryx to maximize their operations during a difficult period.
Instead, it turned out that the rush was petering out. On Aug. 6, Alteryx delivered its second-quarter earnings report. Revenue and new customers were up even more than expected, but the company warned that the pandemic was taking a toll. Customers were beginning to reduce their spending. As a result, growth was expected to slow in the third quarter and for the full year. The next day, AYX stock tanked.
On Oct. 5, the company announced a new CEO as well as a more optimistic Q3 outlook. In the following session, AYX soared, gaining 28%.
In its most recent big move, AYX dropped 20% on Nov. 6, the day after reporting Q3 earnings. Which brings us to today.
Bottom Line on AYX Stock
Until August of last year, it was pretty easy to project where Alteryx stock was going: up.
Despite the rollercoaster AYX has been on for the past 15 months, many financial analysts have a positive view of the stock. Those tracked by the Wall Street Journal give it a consensus overweight rating, with an average $149 price target. There has been little change on that from three months ago — when AYX stock was in yet another sudden dip, after dropping 28% in a single session.
From my perspective, Alteryx is a reasonably safe long-term pick. The company is in a strong position in a market segment that’s seeing big growth. However, it has a “B” rating in Portfolio Grader because it’s not without risk. IT spending could take a prolonged hit if we fall into a bad recession. And if demand keeps growing, that could lure more competition. 2020 has definitely shown that investors in this stock need to have nerves of steel. If you can resist the temptation to not panic when it heads downhill, AYX stock might be worth considering.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.
