2020 has been one heck of a year for growth-stock investors. Many names in this space have seen gains that take years to achieve. Alteryx (NYSE:AYX) was on that list of monster growth stocks. At one point, AYX stock was up 124% from its March low.
However, in an environment where investors aren’t getting many opportunities to buy the dip in growth stocks, Alteryx has given us just that.
Now the interesting thing here is investor behavior. Because many investors don’t like to chase stocks up 200% or more, they want a pullback. That is understandable, of course. However, when that pullback eventually comes, many are hesitant to pull the trigger.
Why is that? Fear, mostly.
But with Alteryx, let’s peel back some of the layers and see what’s going on here. This stock is down about 36% from the highs, and I think that means it’s worth a real look here.
A Look at AYX Stock
Alteryx came into its August earnings hot, but not red hot. AYX stock was putting in a lower high in early August, unable to retest the July high near $185.
When it reported earnings, the company beat on Q2 top- and bottom-line expectations, as sales grew more than 17% year-over-year.
However, management’s cautious outlook spooked investors. Shares fell 5.4% the day it reported earnings after the close, then continued to drop over the following two days.
All in all, it was good for a three-day thumping of 38.8%.
Most of that was tied to guidance. For the year, management expected sales of $460 million to $465 million, below estimates of $505 million. For Q3, an outlook of $111 million to $115 million was below estimates of $119 million.
Now, here’s the interesting part. When Alteryx announced a business update in early October, management revised its outlook higher. In this instance, management forecasted Q3 revenue of $126 million to $128 million, ahead of the prior consensus Wall Street expected when it originally reported earnings.
That effectively translates to a beat-and-beat as it pertains to the Q2 results and the outlook for Q3. Yet, even at the highs from that bounce, AYX stock couldn’t fill the gap from the Q2 gap-down reaction.
Now shares are back down to the post-Q2 area. It’s worth pointing out that the company actually beat its revised revenue outlook for Q3, generating revenue of $129.7 million. And its Q4 guidance is on target with estimates (with a range of $146 million to $150 million vs. estimates of $148.4 million).
However, there is a mixed bag with Q4. On the one hand, guidance barely missed estimates and, at the midpoint, would represent full-year revenue of about $483 million. That’s notably ahead of its prior full-year outlook mentioned above. The downside, though, is that the current outlook represents a negative quarter of growth in Q4.
Breaking Down Alteryx
When we look at the price action above, the volatility is warranted. AYX stock is navigating through a difficult period due to the novel coronavirus. While many other tech companies are realizing accelerating growth, big-data companies like Alteryx are struggling to get customers to expand their budgets.
I think this is a temporary issue. After all, the economy is doing better than expected in its recovery efforts from Covid-19. Additional lockdown measures are not helping, but again, I think these are short-term headwinds.
I’m not sure if AYX stock will surge ahead or hold its current levels. But down about 36% from its highs, and I think we are seeing an opportunity to start accumulating the name.
The revolution in big data is not going to stop. The adoption of 5G technology will not stop (and will accelerate the amount of data generated). Unlike the exponential growth in the coronavirus, the exponential growth in data will not stop.
Analysts expect revenue to grow almost 20% next year to roughly $575 million. My hope is that big-data budgets come back in a meaningful way. Coupled with a new CEO, estimates for Alteryx could be conservative.
Again, I’m not sure what AYX stock will do in the meantime. Maybe this time next year, the stock price will have gone nowhere. But I believe in 12 months, this company will be in a much better position than it is now, and if investors haven’t been rewarded by that point, I don’t think the “prize” will be far off.
On the date of publication, Matt McCall did not have (either directly or indirectly) any positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article held a long position in AYX.
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