TD Ameritrade news:
• Alteryx shares are trading lower after JP Morgan downgraded the stock from Neutral to Underperform and announced a price target of $88 per share. Apr 23, 2020 8:18am
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Not the best link, but here’s what I found:
JPMorgan analyst Mark Murphy downgraded Alteryx to Underweight from Neutral with an unchanged price target of $88.
A slowdown in new business bookings may impact the company’s sales faster than it would for a pure-ratable subscription business, Murphy tells investors in a research note. Further, Alteryx offer an on-premise product with very little cloud exposure, adds the analyst.
Read more at:
https://thefly.com/landingPageNews.php?id=3077805
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I put a summary in the other thread:
35-40% of TCV bookings recognized upfront (and skews to the high end of this
for enterprise customers), so slowdown in new business bookings may impact the
top line faster than it would for a pure-ratable subscription business.
? On-premise product; very little Cloud.
? High ASP, and company recently increased server pricing by 30%.
? Likelihood of relatively higher retail & financial services exposure. From the
most recent 10K: “A significant downturn in the economic activity attributable to
any particular industry, including, but not limited to, the retail and financial
industries, may cause organizations to react by reducing their capital and
operating expenditures in general or by specifically reducing their spending on
information technology.”
? Customers to consider: Air Canada, Westjet, Virgin Atlantic Airlines, Hyatt,
Southwest Airlines, Nissan, Audi, Schlumberger.
- Investors Are
Underestimating the Severity of Bookings Impact Across Renewals, Upsells and
New-Logo Business - Investors Are Underestimating the Potential
Duration of Bookings Impact.
Investors Are Underestimating the Impact of Payment Deferrals.
4) Investors Are Under-Appreciating the Severity &
Future Impact of the Unemployment Claims Spike.
5) Investors
May Be Disoriented about Valuations for this Subset of Stocks, as SaaS Traded at
1.5x Revenues in the GFC.
6) Software
Tends to Get Hit Later in a Downturn.
7) Airlines & Hotels Won’t Be
the Only Industries Under Pressure and Reducing Software Spend.
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A slowdown in new business bookings may impact the company’s sales faster than it would for a pure-ratable subscription business, Murphy tells investors in a research note. Further, Alteryx offer an on-premise product with very little cloud exposure, adds the analyst.
These seem like temporary issues. The downgrade and similar sentiment might drive further volatility in AYX. This might benefit those who wish to add at lower prices. I would keep a longer term view and ride out the volatility. This last article summarizes this perspective.
https://seekingalpha.com/article/4339138-alteryx-long-term-i…
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I have limit orders to buy progressively starting at 70. Will probably move the limits up once we hit Q2 and there’s more certainty about just how much their growth is going to drop short term.
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Out of morbid simian curiousity, Hastan, why is your limit order set to 70, as opposed to say, 71.69? Thanks for the insight––this humble Monkey of little brain always enjoys learning from his much smarter human cousins.
To clarify: Monkey’s assumption is that you know something very specific about the business itself that makes it clear to you that $70 is the maximum number of bananas per share that you’re willing to pay at the moment, as significant amount lower than the market’s going rate, and not a banana more. Since this board is about understanding the long-term prospects of the highest growth businesses with the sturdiest business models, why are you making your cutoff there, specifically? What is it about the business that makes it seem overvalued at prices beyond $70?
Hugs,
Monkey (long AYX and long AYX call options)
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I have no idea where it will trade. That’s the level I would be happy to buy it today. But if results are decent this year I think there is a good chance I will own it again this year at 140 or more per share. As I say long term I am bullish and if you have a multi-year horizon then you really shouldn’t worry. It should do well I think.
However, in Q2 I think there is a decent chance revenue growth is negative. And I think investors in this stock are not prepared for that. So I am hoping I get to buy it much cheaper. No idea if that will happen but this is one stock where I’m very happy to sit out the results carnage as they have very challenging comps from their pull forward in 2019.
All the software stocks I own now have >85% recurring revenue from Q2 and Q3 last year except one which has 70% (but that one trades at just 9x 2019 FCF) - i.e. they only need to generate 15% from new deployments and net expansion to break even YoY. Alteryx has only 50% of revenue recurring from Q2 last year.
I’m certainly not trying to come across as superior to anyone - the results of those on this board speak for themselves.
Hastan,
No airs of superiority were perceived! But Monkey did perceive an implied arbitrary judgement regarding the $70 price limit. Your reply “That’s the level I would be happy to buy it today” does not answer the question: why $70 specifically? (Which, again, is a huge percentage lower than the going rate).
So again: why not $71.69? What makes AYX still too expensive for you at $71.69?
Please don’t think Monkey is flinging poo; rather, he’s trying to understand the thinking behind other minds; maybe his own fair-share-accumulate-AYX-values need to be significantly adjusted.
Humbly,
Monkey
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70 is a nice round number and 71.69 isn’t. If it went to 71.69 I’d buy some I think. But would need to be a conscious decision rather than just hitting my limit.
I have a lot of limit orders in my trading system at prices that will probably never hit. And certainly there a strong chance I never get hit at 70 in AYX.
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Regarding AYX; I have an “Alert” setup on my Etrade platform to give AYX a look if/when it hits $72/share.
Why $72/share? My most recent opportunistic entry occurred on April 3rd when AYX pulled back and I added a position at $80.37/share.
In terms of allocating resources to deploy into the market towards high conviction companies on a pullback; I would like to see an additional 10% drop below my latest opportunistic entry position. In this instance, AYX would need to drop 10% below $80.37/share.
Harley
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I’ve been beating the drum on Alteryx for a while, but this argument makes sense and aligns with my own worries with the upcoming earnings coming up.
The analyst is ranked 192 out of 6481 on TipRanks.
I don’t see why their revenue recognition method would impact the stock price going forward as this information is publicly available. Everyone that follows this company knows that they recognize approx. 35% of contract value upon signing and revenue is thus somewhat inflated initially. I believe this also explains why Alteryx is only valued at 13 times forward revenue vs for example COUP, OKTA, DDOG at around 20 times revenue. (because if AYX would recognize revenue ratably, revenue would be lower and P/S would be closer to these companies).
Everyone also knows that in a slowdown, Alteryx revenue growth will decelerate more than your average SaaS. The opposite is also true, when the economy recovers growth will accelerate more than its peers. This is simply an accounting method and will not impact the actual performance of the company and what matters the most in my view, the cash flow.
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The analyst is ranked 192 out of 6481 on TipRanks.
Bert Hochfeld was ranked 3 out of 6481 last time I looked (which I admit was a year ago or so). Bert has Alteryx as a buy now.
Saul
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While revenue growth might be negatively impacted in the short term, it’s hard to know how the market will react. Pre-covid a couple short months ago, this company was hitting it out of the park and valued about 40% higher than today’s closing price. I don’t see why there should be a change in the longer term picture. Will the market look past the short term speed bump or not? I just don’t know with recent volatility.
Bert is ranked 2 out of 7625 bloggers. A better ranking, although a different category.
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The analyst is ranked 192 out of 6481 on TipRanks.
Bert Hochfeld was ranked 3 out of 6481 last time I looked (which I admit was a year ago or so). Bert has Alteryx as a buy now. Saul
I inspired myself to look up his current rating:
Ranked #2 out of 7,265 Bloggers on TipRanks
And, as I said, Bert has Alteryx as a buy now. He’s certainly not always correct, and I’ve felt he was quite wrong about some things, but 2 out of 7,265 is not bad.
Saul
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I would not worry too much about the JPM analyst rank or his “downgrade”. He has been constantly wrong on software for as long as I can remember. Especially wrong on AYX and COUP (both were downgraded him today)
Not to say that the stock won’t go down. But 99% of the time following analyst target changes to make your investment decisions is not a good move. They have other motives, etc.
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AYX is one of six stocks downgraded by JP Morgan per The Street. TWLO and SMAR were downgraded to neutral, while AYX, COUP, CDAY, and PAYX were cut to underweight.
My guess is that AYX will figure out ways to grow and sell by alternative means to face to face visits. Scientists and other analysts need their products more than ever as big data can save lives and enhance business.
https://www.thestreet.com/investing/jp-morgan-downgrades-six…
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Saul, thanks for posting Bert’s rank. I had no idea that he was ranked so high.
https://www.tipranks.com/bloggers/bert-hochfeld
I have had a subscription to Ticker Target (Bert’s site) over a year. As stated in several older posts, the knowledge gained is well worth the cost.
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“… on-premise product with very little cloud exposure, adds the analyst.”
Why little cloud exposure?- it’s like being behind in mobile a few years ago in its potential impact.
Is it a security issue related to the proprietary data being entered for analysis?