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Alteryx Stock Gains 8% after Strong Q3 Results

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Alteryx (AYX) shares have risen close to 8% in early market trading today. The company announced its third-quarter earnings during after-market hours on Thursday. Alteryx reported sales of $103.4 million with an EPS of $0.24.

Analysts expected the company to post sales of $90.47 million and an EPS of $0.09 in the September quarter. In the December quarter, Alteryx forecast sales between $128 million and $131 million compared to analysts’ estimates of $126.16 million.

The revised forecast also means that the company’s revenues for 2019 are forecast between $389 million and $392 million—up from the previous forecast of sales between $370 million and $375 million. Analysts expected sales of $374.54 million in 2019.

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In the September quarter, Alteryx’s sales rose by 65% year-over-year. The company’s CEO, Dean Stoecker, said, “Our track record of strong execution continued in the third quarter. We are emerging as a strategic partner for enterprises across the globe looking for real-world solutions to data challenges.”

Alteryx has a huge addressable market

We know that Alteryx is part of the high-growth data analytics space. The company estimated that enterprises waste $60 billion from analysts doing repetitive tasks in spreadsheets.

The company provides a code-free platform and integrates 250+ tools with a wide range of pre-configured predictive and statistical models. Alteryx has estimated the addressable market at $73 billion.

Notably, Alteryx has a diverse customer base including retail giants like Ikea and Walgreens. In food services, the company’s clientele includes Kraft Heinz and Kellogg’s. Meanwhile, in the tech industry, Alteryx has contracts with Cisco and Dell.

Alteryx has more than 5,600 customers. The company has managed to grow its sales from $86 million in 2016 to $254 million in 2018.

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High gross margin 

In the September quarter, Alteryx’s gross profits were $93.75 million or 90.7% of the total sales. However, the company is spending heavily on research and development as well as sales and marketing.

While the company’s revenues rose 65% year-over-year in the third quarter, its research and development spending rose 68.6%. Alteryx’s sales and marketing expenses rose 76%. As a result, the company’s operating income rose 27%. Alteryx’s operating margin fell from 15% to 11.6%.

What do analysts think about Alteryx?

Earlier today Citi (C) analyst Tyler Radke reiterated a “buy” rating on the stock with a target price of $150, according to a report from The Fly. Radke thinks that the stock will be volatile. Investors will likely be concerned about the company’s decelerating growth. Analysts expect Alteryx’s sales growth to fall from 90% YoY in 2019 to about 30% in 2020.

Rishi Jaluria from D.A. Davidson lowered the target price on Alteryx to $95 and reiterated a “neutral” rating on the stock. Jaluria is concerned that sluggish enterprise IT spending will impact sales in 2020.

A fall in IT spending has been a concern for a few months. We have seen how DXC and NetApp shares were decimated in August due to softness in IT expenditure. Arista Networks (ANET) shares fell 25% today after it drastically reduced the forecast for the December quarter. The company attributed the lower guidance to soft demand from a major cloud customer.

However, Alteryx stock is trading at $98, which is 33% below its 52-week high. The company continues to invest heavily in research and development and product development, which will help it gain traction in a high growth segment. We identified Alteryx as a stock to buy on major dips. So far, the stock is gaining momentum after a strong third-quarter performance.

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