Why Did Alteryx Shares Pop 25%?

Author: Tim Phillips

October 6, 2020

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Alteryx Inc (NYSE: AYX), a data analytics software provider, surged 23.2% in after-hours trading after the company announced a new CEO and updated revenue guidance.

Tim’s Take:

Data in the digital age is more important than ever. It seems that firms dealing with the troves of it are everywhere. Alteryx is one of them. 

The firm runs a self-service data analytics platform for businesses that allows them to prep and analyse data in order to solve everyday business problems. 

It’s no secret that Alteryx has suffered over the past few months. With a share price flying close to US$180 at the beginning of August, it fell off a cliff after reporting disappointing second-quarter results and, more importantly, weak guidance.

After losing about 40% in the days after that earnings report, the company’s shares have managed to rebound about 30% (including last night’s monster gain).

But what about its numbers? That August sell-off was sparked by some weak guidance of around 7-11% year-on-year revenue growth for the third quarter after it had posted 65% growth on the top line for full-year 2019 and 43% in the first quarter of this year.

Tech volatility on guidance

The reason? Sales headwinds. Alteryx confirmed an elongated sales cycle where more deal scrutiny and stiffer approval processes were weighing on its growth.

Yesterday’s surprise announcement – where the company updated its third-quarter outlook for year-on-year growth of 22-24% and replaced CEO Dean Stoecker with board member Mark Anderson – helped cement how investors should approach high-flying tech stocks.

If investors hold these tech stocks, you have to be prepared for big moves either up or down on earnings guidance and revisions. 

More importantly, guidance is now the needle-mover in terms of the share price rather than the latest earnings themselves (given how often tech firms beat).

It shouldn’t stop you looking further out and understanding whether the fundamentals of the business remain sound – Ateryx in its latest quarter still posted a gross margin of 90%.

Regarding Alteryx’s own situation, the updated guidance is obviously great news. The fact that the co-founder and CEO is being replaced doesn’t fill me with the greatest confidence if I were a shareholder.

However, the man taking over the CEO role, Mark Anderson, has a glittering career in tech having served stints at cybersecurity firm Palo Alto Networks Inc (NYSE: PANW) and cloud-based planning software firm Anaplan Inc (NYSE: PLAN).

I’ll be keeping Alteryx as one to watch but if growth does pick up (along with guidance when it releases results on 5 November) then we could very well see it returning to its highs earlier this year.

Disclaimer: ProsperUs Head of Content Tim Phillips doesn’t own shares of any companies mentioned.

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About the Author: Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth. He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. In his spare time, Tim enjoys running after his two year-old son, playing football and practicing yoga.