AYX decline has been relentless despite recent excellent earnings and growth rates. In less than one month it’s gone from $150 to $82. Just Brutal. When does this stop being a buying opportunity? I’m surprised this one isn’t holding up as well as some of the other board favorites…
Cobra
I added 5% more today taking me to 17.5% which is a real stretch for me. Someone else pointed out a large short interest, I think around 21%. One of the houses kept it even on March 31st. I have read everything I could find, relooked at posts, and still find nothing. If anyone has insight I would love to hear it. And talk about a buy out time, a little surprised that has not happened.
Yes, it’s bizarre. I noticed that Piper Sandler lowered its price target from 150 to 90 yesterday while maintaining a neutral rating. I can’t find any fundamental reason or other news. I can only assume that Piper Sandler believes AYX’s business will take a hit due to the Covid-19 pandemic. Just before that a month ago, its business was roaring and the stock price was hitting an all time high, almost double today’s price.
I have a small position now and I guess I will hold on for now. I don’t see any good reason for AYX’s longer term outlook to be weakened at this point. But I won’t add anymore with this kind of price action. Maybe it will be a buying opportunity like CRWD at 31 or maybe it will drop further. There doesn’t seem to be a lot of longer term thinking in these price moves.
Dave
IMO AYX if AYX keeps moving down towards $60 some large tech co rich with cash may throw out an offer to purchase them. That would probably not be good for holders that were hoping for LT compounding here. (Many here including me)
Bnh
Any buyout has to be approved by the board of directors. It’s not a convern of mine.
So, my take on why AYX is suffering is because for a while nobody will care about it.
If you’re the president of a company, you’re likely dealing with customers vanishing, employee absences and layoff, your supply chain collapsing, debt covenants being violated, and revenue plummeting. You’re probably not thinking about how different demographics respond to different types of messaging, how tweaking your messaging can increase your engagement by 7%, or the correlation between the sales of your product and alcohol consumption.
You’re just trying to keep the boat afloat. You care a huge amount about tactics, and not that much about strategy. You don’t care much about analytics except what it gives you today. You certainly don’t care to waste your time and money evaluating which analytics software to buy to improve your long-term growth.
Alteryx will maintain almost all its customers, particularly the big businesses. But they won’t get many new ones for a while.
Saul is typically ruthless in pruning companies when their growth slows, and here the slowdown in growth is extremely foreseeable. So, should we really expect the stock to hold up well when it’s pretty obvious that Alteryx’s growth is about to hit a brick wall?
(I’m curious if Saul will give Alteryx an “extraordinary circumstances” pass in the next few months when its growth plummets.)
Alteryx will maintain almost all its customers, particularly the big businesses. But they won’t get many new ones for a while.
Saul is typically ruthless in pruning companies when their growth slows, and here the slowdown in growth is extremely foreseeable. So, should we really expect the stock to hold up well when it’s pretty obvious that Alteryx’s growth is about to hit a brick wall?
Yes, this seems to make sense. But this should be a temporary issue, shouldn’t it? If so, how much of this is already accounted for in the almost 50% drop in market cap? If it continues to drop, when will it be a screaming buy since growth rates should rebound?
Dave
Of course this is temporary but market tend to think short term, creating opportunities for long term outperformance. I am confident that this company will be significantly larger in five years compared to today, so there’s no way I will sell any Alteryx stock.
Growth rate will come down, especially since they recognize approx 35% of revenue when signing a new deal (usually for 2-3 years duration) and new deals won’t be easy in this environment. This will however also lead to easier comps once the crisis is over and have them return to monster growth rates.
@comment with regard to buyout: do you really think Dean Stoecker will sell his company at a big discount? No way
Yes, this seems to make sense. But this should be a temporary issue, shouldn’t it? If so, how much of this is already accounted for in the almost 50% drop in market cap? If it continues to drop, when will it be a screaming buy since growth rates should rebound?
Implicit your this argument is that Alteryx was correctly valued before the big drop, and I’ll assume that’s true, though it shouldn’t be a given. (I mean, everyone here has basically bought AYX based on a narrative, a amazingly consistent growth rate, and a P/S ratio. Now the growth rate is going away at least temporarily, so how do you decide upon the valuation under those circumstances?)
If the recovery is literally a couple months away (i.e. Alteryx’s growth falls for two quarters then returns to 60%+), I think the fall is more than priced in. I think it’s even priced in if growth stops for, say, 2 years and then continues because–if you look at discounted cash flow models–sustainable businesses never have half of their value attributed to their first two years.
The problem is, while businesses often imply their falling growth is temporary and that their growth will return, it’s fairly unusual for that to actually happen. Now, a pandemic is an extraordinary circumstance, so it seems more likely to happen this time than most other times, but I still think it’s under 50% likely. I think there’s a pretty good chance that, after the quarter that ended in March, Alteryx never again hits 50% growth.
(All that said, I’m long Alteryx. I just don’t want to gloss over bearish scenarios.)
revisiting this post just as a history lesson and other lessons that we might learn. rbgibbons correctly called, in early April, the AYX dynamic that played out in Q2, and we could have sold our AYX position, then, in early April. But if we did, we would have missed out on a 35% gain: AYX was around ~$82 in early April (closed at $81.74 on April 3, 2020), and is now at $111 (closed today at $110.74, August 11, 2020). Just considering those two points results in a ~35% gain on your money in four months. If I told you, on April 3rd, that you would be up 35% in mid August if you held your position, you’d take that offer and never look back. Any one of us would take that proposition. And yes, AYX was at $180 between then and now, but it’s instructive to look at the bigger picture. And I’m sure there are people out there that bought AYX above $170 or so, and are not happy now. All this to say that …:
Given this uncertainty, a great strategy, I think, is to still…
Over the long run, this has been shown to produce the satisfactory results. (McKinsey report, Saul’s performance since 1996)
"Given this uncertainty, a great strategy, I think, is to still…
* invest in the best companies in their sector, (e.g. category crushers),
* use The Criterion (e.g., Saul’s criterion: hyper rev growth, high recurring revenue, high gross margins, strong management, competitive differentiation, switching costs, improving metrics, customer base diversification, and the like), and
* invest with the idea to hold, but follow the companies closely, and get out when the story has changed."
Agree with the above. It stinks to buy near a peak and then watch a stock drop, but it’s impossible to time it.
Also, AYX is not the only stock to have a big drop from its recent highs:
DDOG $99 ==> $75 (25%)
ZM $281 ==> $231 (17%)
FSLY $118 ==> $75 (36%)
AYX $185 ==> $110 (40%)
So, it’s painful - but it’s “normal”. With high growth, there is high volatility. The price often gets ahead of rational levels and when the pendulum swings, it usually overshoots on the low side also. Then things stabilize and the process repeats.
Look at CRWD chart from the last year - it was at 100 shortly after IPO and then fell all the way down to mid-40’s even before COVID. 55% drop.
I think everyone here believes all those companies will reach all-time highs again. Just need patience. And recognize that it could get worse before it gets better. No one knows what is coming next.
And you can’t judge it just by how much a stock has gone up. It might be tempting to think - “well, my stock has gone up 100% in a few months, so it must be ready for a pullback - maybe I should sell it now before it drops”. That is what I did with LVGO this year - it went from 25 to 50 in about 6 weeks and I sold $50 calls on half my shares bc I was scared of loosing the gains. Then it proceeded to go all the way to 150. (facepalm) In 10 days I will have the pleasure of selling some lucky person half of my LVGO shares for $50 - because I was trying to time the market. You have to be able to live with the big swings up and down in stocks like these.