A Good Time To Buy Alteryx

Alteryx (AYX) reported earnings on Wednesday, May 6, after the market close. The numbers for the first quarter were clearly strong, but guidance for the second quarter came in below expectations and the company provided no guidance for the full year of 2020. As a reaction, some Wall Street analysts are cutting their price targets on Alteryx, citing factors such as disappointing Q2 guidance.

There is a considerable chance that management is being overly conservative with guidance, and I wouldn't be surprised at all if the numbers for the second quarter turn out to be materially above expectations. Besides, the business fundamentals are as strong as ever, and Alteryx is proving that it can provide valuable solutions for clients during the pandemic and the recession that comes with it.

At current prices, Alteryx looks conveniently valued in comparison to other high growth stocks in the sector, and the company offers plenty of upside potential in the years ahead.

Management Is Being Too Conservative

Total revenue during the quarter grew 43% to $108.8 million, and the company generated $20 million in operating cash flow during the period. Alteryx added 356 new customers and the net dollar retention rate was remarkably strong at 128%. The numbers show that the company kept gaining new customers and also making more revenue per customer during the period, so the value propositions for customers are as strong as ever.

Source: Alteryx

However, management is expecting a modest increase of 10% to 15% in revenue during the second quarter. This was the main weak spot in the report and the main reason for disappointment among the analysts following the stock.

To begin with, it is important to keep in mind that Alteryx always provides modest guidance numbers, as the company likes to keep expectations at bay and consistently overdeliver. In fact, Alteryx has delivered revenue numbers above Wall Street expectations in each of the past 13 quarters in a row.

Source: Seeking Alpha

One of the analysts in the conference call asked for more precision regarding the guidance numbers, and this is what management had to say:

"We've always been conservative even though we've seen some glimmers of hope in April. It turns out of the logos we brought-in in April 35% of them were actually in the highly impacted verticals, that's also some silver lining in this. But as you know, we've been fairly conservative."

In a nutshell, management is saying that the numbers for April showed some encouraging signs, and the company did in fact close some deals with customers that are being highly affected by the pandemic.

But Alteryx is always conservative when it comes to guidance, and the current economic environment is unprecedentedly uncertain, so it makes sense for the company to be especially modest in its assumptions for the second quarter of 2020.

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I am/we are long AYX, TWLO, TTD.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it ...

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