In a market in which growth stocks have ruled the roost, the last few months have been a slog for previous highflyer Alteryx (AYX). The analytics software company might have beaten the estimates in 3Q20 but its 4Q20 guidance failed to impress.
The underwhelming real world performance has been mirrored by the share price decline. The stock now sits 40% below the all-time highs achieved in July last year.
Which begs a couple of questions: Are the growth boots too big for Alteryx to ultimately fill or does opportunity beckon?
For Rosenblatt analyst Blair Abernethy, the answer is undoubtedly the latter. Abernethy initiated coverage of Alteryx with a Buy rating and a $150 price target. The implication for investors? Upside of 37% from current levels. (To watch Abernethy’s track record, click here)
So, what does Abernethy’s bullish thesis rest on?
“In our view, Alteryx is well positioned to benefit from Digital Transformations and the automation of advanced analytics, enabling it to continue to grow its ARR (annual recurring revenue) at a healthy pace in coming years,” the analyst said. “We believe that Alteryx has a growing total addressable market of $49b, consisting of $24b in line-of-business analysts and knowledge worker demand and $25b in IT analysts, data engineers and other technical staff.”
Covid-19 has undoubtably slowed down Alteryx’ progress by negatively impacting sales. However, Abernethy thinks Alteryx’s advanced analytics solutions and technology platform can play a “key role in an enterprise’s multi-year Digital Transformation journey.”
Furthermore, Abernethy believes the company has yet to fully monetize its growing customer base. While Alteryx had 2,800 customers in 2017, the number has expanded to 6,900 today. During the same period, its dollar-based net expansion rate – a SaaS metric which measures growth from existing customers - has been over 120%. As the average ARR per customer today is only roughly $71,000, Abernethy sees “significant upsell opportunity.”
A recent changing of the guard in the C-suite is a further tailwind. New CEO Mark Anderson has experience in scaling up software companies having held top executive positions in fast-growing tech companies, one of which was president at Palo Alto Networks.
“We believe this appointment will prove well-timed as we enter the post-Covid period and help provide the strategic vision and product direction to marketplace and the Alteryx team for the next several years,” Abernethy summed up.
Overall, the rest of the Street agrees with Abernethy’s position. Based on 7 Buys and 4 Holds, the stock has a Moderate Buy consensus rating. At $147.33, the average price target suggests upside of ~35% over the next 12 months. (See AYX stock analysis on TipRanks)