Alteryx (NYSE:AYX) just tanked on some poor second-quarter earnings. But we think the crash presents investors with a major buying opportunity in AYX stock.
Just to set the record straight — the numbers Alteryx presented were awful. We know that.
The second-quarter numbers themselves were pretty good, and the company largely topped estimates, but that’s where the good news ends.
Third-quarter and full-year guides were flat out bad.
Alteryx is essentially saying it won’t grow revenues at all in the back half of the year, which is a big red flag for a stock trading at 8X forward sales.
But we looked a little deeper and think there’s a reason behind this lackluster forecast — namely, ephemeral accounting and labor issues that will soon sort themselves out.
On the accounting front, Alteryx is pivoting toward a cloud business model. And this means memberships with shorter subscription contracts. That’s certainly weighing on reported revenues, because, per accounting rules, the duration of a contract matters with regard to how much revenue to recognize in a specific period.
But, on the other hand, average contract value increased. So, the company’s annually recurring revenue (ARR) base is actually unaffected by these shorter-length contracts. We believe ARR is a more truthful gauge on the fundamental health of the business. And we think it’s a leading indicator for revenues, given the pivot to the cloud business model.
Therefore, we’re actually quite confident that revenue growth trends will rebound in 2022 and beyond, especially since customer growth trends remain very healthy.
As far as the aforementioned labor issues, the company is saying there has been significant attrition in its sales team due to prevailing labor conditions in which people just don’t want to work in sales anymore.
This is part of a broader labor shortage issue that we believe will resolve itself in September when children return to school and stimulus benefits end.
The Bottom Line on AYX Stock
In summary, we believe Alteryx’s Q2 numbers were bad enough that AYX will be weighed down for the next few weeks.
But, in the longer run, this is an opportunity.
Alteryx is a very good business going through a very good, albeit tough transition.
And that’s why we’d recommend buying on the dip, since AYX stock is currently very undervalued and has solid upside potential.
Many of the stocks I cover in my premium newsletter advisory service, Innovation Investor, are as exciting or more exciting than TK stock.
In fact, I have more than 50 hypergrowth stocks, each of which corresponds to a specific emerging megatrend, which could score investors Amazon-like returns over the next few months and years.
By subscribing today, you’ll also gain access to a number of my special research reports, including deep dives on 3 World-Changing AI Stocks to Buy, 7 Hyperscale Stocks to Buy in 2021, and my cornerstone investment guide, The VC Insider’s Millionaire Playbook.
What’s more, you’ll have complete access to my model portfolio, which includes stocks like the world’s most exciting autonomous vehicle startup, a world-class “Digitainment” stock creating the building blocks of the metaverse, a company that we fully believe is a “Tesla-killer,” and many more.
To get started, click here to watch my first-ever Exponential Growth Summit and to subscribe to Innovation Investor today.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
By uncovering early investments in hypergrowth industries, Luke Lango puts you on the ground-floor of world-changing megatrends. It’s the theme of his premiere technology-focused service, Innovation Investor. To see Luke’s entire lineup of innovative cutting-edge stocks, become a subscriber of Innovation Investor today.
View more information: https://investorplace.com/hypergrowthinvesting/2021/08/buy-the-ayx-stock-dip-to-play-alteryxs-eventual-long-term-rebound/