Why keep AYX?

Investment Analysis Clubs Saul’s Investing Discussions
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First, thanks for the great writeup!

I searched on Indeed and saw many, many companies looking to hire experienced Alteryx users. Currently, 765 different job postings mentioned Alteryx by name.

I find that a bit perplexing. The main value proposition for Alteryx is that it is “self-service.” You don’t need programmers or similar expertise to gain value. As they say about themselves (https://www.alteryx.com/ ):

We are a leader in the self-service data analytics movement with a platform that can discover, prep, and analyze all your data, then deploy and share analytics at scale for deeper insights faster than you ever thought possible.

Their web page for Designer (https://www.alteryx.com/products/alteryx-platform/alteryx-de… ) goes into more details:

For many analysts throughout marketing, sales, finance, or customer insight, the process involved in prepping, blending, and analyzing data is slow and painful. It requires many tools and people to gather, cleanse, and join data from different sources, then more tools to build and publish analytic models — and then even more effort to get those models and insights into the hands of business decision makers.

Alteryx Designer streamlines the process by delivering a repeatable workflow for self-service data analytics, leading to deeper insights in hours, not weeks. Alteryx Designer empowers data analysts by combining data preparation, data blending, and analytics – predictive, statistical, and spatial — using the same intuitive user interface.

So some of Alteryx’s value proposition is self-service, the other is that all the tools you need are right there.

Ironically, when I was pushing Alteryx for a big (for us) IoT project at my previous company, the response from the Data Scientists was along the lines of “Alteryx isn’t for Data Science professionals like us. Some departments use it, but we’d rather use more “expert” tools.” I took that as a snub and maybe even them being scared of what Alteryx enables, including not needing as much expertise as most other existing products.

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I am counting on AYX continuing to be best-in-class.

While I agree with the rest of your expert analysis, I like to keep things simple. This sentence is enough for me. AYX is top dog in a rapidly growing niche and its even working on expanding this niche. I have made mistakes recently exiting stocks which were top dogs. With AYX, I’m not concerned about the short term but rather what is likely to happen over several years or longer. So it will remain one of my hyper growth positions.

Dave

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Nice write-up Bear. I remember hearing that comment on the CC and thinking okay, rough maths, guiding to flat is pretty much guaranteed, and it wouldn’t take too many positives to see growth rate accelerate fast. I did not follow it up though, so thanks!

You don’t need to be a programmer to use Alteryx, but it does take some skill and knowledge. Anyone who is an experienced excel user will have little issue picking up designer. If you’re a macro/visual basic power user of excel, you’ll fall in love with designer.

If you’re at school, doing a chemistry project and have several dozen lines/columns of data (i.e. small), you’ll be much faster using excel, particularly for simple things. Small changes can take comparatively longer in designer.

My point being, those job adverts don’t really need to be looking for experienced alteryx users. They just need experienced data analysts. There are a lot of data analysts using excel out there. A lot of data scientists may know one coding language, the may just know excel.
Maybe the data scientists in your company are incredibly experienced, know a dozen different languages and tools and know when exactly to use which one, given a specific task. They’re not AYX’ target market.

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I find that a bit perplexing. The main value proposition for Alteryx is that it is “self-service.” You don’t need programmers or similar expertise to gain value.

Salesforce.com, Microsoft Office and many other software tools are pretty easy to use or figure out how to use and yet so many job postings want “Salesforce” or “Microsoft Office” experience. It isn’t a reflection on Salesforce or Microsoft that their software is hard to use, just that the hiring companies want people with experience using those products.

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I agree, I am holding my full position, yes next quarter could be a bit rough but I like to look long term. I think AYX will be just fine once COVID is figured out. I don’t see any issues with the company that causes me to change my thesis.

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Saul mentioned “Alteryx is pulling in its horns, cutting hiring, reducing spending.” I would somewhat disagree, given their new offering, etc. I think the verbiage to this affect on the CC was just to signal that they have the ability to control spending and tailor it to the demand they’re seeing

Hi Bear,

I think that them talking about pulling in their horns, cutting hiring, and reducing spending was just their initial overly panicked response, but based on all the job offers they put out, and their new products, they’ve changed their minds and started to go for it like everyone else.

What will revenue be? Who knows? But for this quarter, with the top of their guidance at 16%, my guess would be more like 25% to 35% (either of which would crush guidance). If they hit 40%, as you predict, it would just be more gravy. On the other hand, while others of our companies are experiencing the pandemic as a tailwind, Alteryx isn’t. They seem to be just getting better at adjusting to it, so keeping our 12% positions and waiting it out makes sense.

Best

Saul

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Bear,

In the AH like you I sold 25% of my position at <110$. Saul and Tinker did made fun of people who sold if I recall:) AYX is still my biggest position though close to 20%. In the CC while giving the outlook they pointed out the following:

  1. uncertainty of new customers
  2. timing of renewals
  3. slight churn
  4. more flexible payment terms

The first item affects the 20-25% in quarter bookings as you pointed out, The second and third item affects the 15% renewals, and the last item affects the 60-65% RPO. So, it appears that the above 4 items they have listed affects all parts of their revenue for Q2. Some hotel chains with no revenue coming in is likely to be negotiating flexible payment terms or trying to delay it’s renewal if it is coming up. So, that 60-65%, and 15% is also somewhat impacted not just the 20-25%.

Much of the price action in recent times I think is tied to the expectation of a more quicker recovery from covid.

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At this point, I am in the “Keep AYX” camp, or should I say the “Not Trimming My AYX Position” camp.

I think sometimes we just have to save ourselves from ourselves when it comes to “trading” as opposed to “investing”. And that is typically accomplished by using the easiest of investment strategies currently available to all of us…“DO NOTHING”.

Perhaps like me, many of you are suffering from “Stay At Home Portfolio Syndrome”. You have more time on your hands, you have unfettered access to your investment accounts with a multitude of connected devices, there are no co-workers or bosses looking over your shoulder at your desk, and no lack of volatility in the market or discussions of the market on various news outlets to drive your anxiety. You are finding yourself repeatedly toggling between the tabs at the top of your laptop screen; going from email, to Etrade, to Saul and even checking for a new article on Ticker Target. Constantly hitting refresh with childlike anticipation in the hopes of finding more “green on your screen”, more articles to read and perhaps some sage advice or nuggets of wisdom from a Saul Message Board contributor.

All the while your anxiety to do something, to do anything with your account is gnawing at you. So much idle time on your hands, so much to do with your account…isn’t everyone out there trading today? Shouldn’t I be buying or selling something today? You are in that proverbial battle between “Sell - Don’t Sell” or “Buy - Don’t Buy” with the “trader gremlins” taking up positions on each of your shoulders hunched over your keypad.

Please, do yourself a favor! Take a deep breath. Pause. Go for a Walk. Best of all; repeat to yourself the Investocratic Oath…“Do Nothing…But, should you find you must do otherwise, then First Do No Harm.”

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I anticipated the post would be lost on some, not apply to some, but perhaps be respected by most.

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a strategy for a momentum investing board

I doubt that there are many of the senior participants here that would characterize what is done here as “momentum investing”.

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I doubt that there are many of the senior participants here that would characterize what is done here as “momentum investing”.

It’s okay tamhas, if you scan back over carter’s previous posts, you’ll see that he contributes little to the board, and that a large proportion of his his output is snarky little posts just like that one (and that 90% of his posts have just zero, one, or two recs). I wouldn’t worry about him.
Saul

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excuse my spell checker, that’s Carver, not Carter.

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Reason to hold is because it is a category crusher and leader in the field. There aren’t really any other companies who offer non data scientists an opportunity to work seamlessly with large amounts of data.

The TAM is massive and covid will just accelerate the shift towards data science. Additionally I can definitely see them being an acquisition target in the next few years.

Would be a great bolt on for Microsoft for example. Can do so many types of analysis that can’t be done in MS excel. As well as do repeatable steps if working with the same data every month.

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Nothing analytical or meaningful to add, just compelled to share…

AYX was the first stock where I took a full position in a new company during my transition from ~55 stocks to ~8-12. I learned about AYX here, I think from Saul. I’d been reading about concentrated portfolios for a time, disillusioned with the / ratio of following some Foolish / other subscription portfolios.

My only regret now is not ‘backing up the truck’ when AYX was under $100/share. This looks to be a generational-wealth-building investment. As always, stay informed, be alert.

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Agree Bear

I think it’s pretty unrealistic that revenue growth could be less than around 30% in Q2. And as I said, I’d expect 40%+. And I even think a realistic possibility is that they re-accelerate to 50%+ growth or more. All that would take is normal renewals, and for in-quarter bookings to return to maybe 75%+ of what would have been expected in a non-COVID world.

That’s why I’m holding through the medium term

n short, I still like AYX long term. They’re seeing a bit more financial impact than DDOG and others…but DDOG sports a PS of about 54 and AYX is at about 21. The risk/reward on AYX seems more than fair to me. I’ll keep my 13% position and consider adding if share price dips.

…and that’s I’m not cutting my ~8% in order to look for redeployment options. (The way I have done with MDB for fundamental reasons and Shopify for concentration reasons).

Ant

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Smorgasbord1,

I thought I might chime in about your question:

“I find that a bit perplexing. The main value proposition for Alteryx is that it is “self-service.” You don’t need programmers or similar expertise to gain value. As they say about themselves (https://www.alteryx.com/ ):”

I was a data analyst and an Alteryx designer user at a medium sized insurance company (1,5000 employees or so).
I did this for about a year before I moved into wealth management. The company used Alteryx extensively to help manipulate and cleanse operational data so that we could create analytics dashboards, create reports and answer questions from upper management.

I came in with no data analyst experience and no knowledge of Alteryx. Within 3-4 months I had a rudimentary ability to use the tool and within a year I was able to effectively to pull data from multiple sources and manipulate it. That said, there were others on my team with more experience (and more technical aptitude) that could do amazing things with Alteryx. While I was mostly just cleansing and manipulating data they were creating complex macros, custom formulas all while navigating multiple levels of detail. The best analysts on the team would even integrate python script into the tool for more complex formulas.

All that is to say, Alteryx is an amazing tool that is very user friendly for beginners. (Some people in the finance department used it only to replace excel reports that they used to create by hand - this saved them hours of work each day!) But it also has an amazing depth to it if you know what you’re doing. Together, this makes it a great sell. There’s relatively low barriers to entry for using the tool but there’s always more potential value that you can get out of it.

Also, as a side note, Alteryx is very, very sticky business. Our small team of data analysts using Alteryx created workflows that ran daily and hourly to pull fresh data into visual dashboards and reports. The net result is that all of the operational and sales dashboards and many of the reports (that go out to the field as well) were dependent on these Alteryx workflows running each day. Getting rid of Alteryx would dismantle this entire network of analytics.

Hopefully this provides a little bit of clarity.

-Calvin

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Two months ago I predicted (in the first post of this thread) that I believe AYX will grow 40%+ this quarter, and I still believe that. What is starting to worry me is guidance for the next quarter, and the next few. AYX has always enjoyed an extremely high NER because its customers use it more and more over time. Some of those customers are hurting in this recession.

Now, there’s a case I’ve made in the past that you don’t stop spending on AYX if you can spend a dollar with them and turn it into 3 dollars because the product creates value. This works in a booming economy, because growth abounds, so there are always 3 more dollars to grab if you spend 1 more. In other words, in good times AYX’s customers’ customers are buying. Example: PWC doing consulting projects using AYX. If there are less of these projects, maybe their “expand” with AYX goes down. Then there are customers like Coca-cola who (I assume) are using AYX only internally, rather than for consulting. If these companies are hunkering down and spending on essentials (like cybersecurity) then perhaps they don’t “expand” as much as usual with AYX. We saw NER tick down last quarter…could it fall further? Looks like data science might not be a priority right now: https://www.zdnet.com/article/developer-data-scientist-us-te…

Contrast the AYX customers I’ve outlined above with FSLY whose customers (Shopify, Amazon, etc) are thriving in the current environment.

Contrast CRWD and DDOG and ZM whose customers may include both thriving and struggling companies, but who need CRWD and DDOG and ZM to help them survive in a cloud world.

In summary, is AYX’s product essential, or is it more related to business growth and expansion, which may be on hold right now?

To be clear, I have no idea what to expect from the growth numbers in the near future (and that’s what scares me). Alteryx was so attractive because growth was actually accelerating. 60% or 70% growth is game-changing, but we can’t expect that any more. If the growth for the near future is really going to fall to 20% or below, we could see a world of pain, but that’s not what I expect, either. So if we end up in some sort of middle-ground scenario where AYX grows in the 30% or 40% range for the foreseeable future, I’m not sure AYX is a knockout “buy” right now with a PS ratio around 25. To me that seems like about the most we can logically expect, but I’m open to other thoughts!

I’ve trimmed some more and my AYX position is under 8%, and I am considering if I should be trimming further.

Bear

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Then there are customers like Coca-cola who (I assume) are using AYX only internally, rather than for consulting. If these companies are hunkering down and spending on essentials (like cybersecurity) then perhaps they don’t “expand” as much as usual with AYX.

From people who work at Coca-cola what I understand is that they are relying more heavily on AYX to help them analyze their massive business. They are trying to optimize their operations, manage costs, focus on highest revenue and margin areas, purge pieces of their business that are not performing. It is more important now than ever to analyze and optimize their operations and AYX product is a key to this.

I don’t know if this translates into more direct spending on AYX products or just extending their existing agreements.

ClydeJ - no position in AYX.

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I think the biggest risks of this “COVID” environment are:

#1: Selling GREAT companies with GREAT products because we believe their business might see a temporary down turn.

#2: Buying less great companies (hello Blue Prism) because we think they are a timely opportunity.

#1 is worse because of the massive opportunity cost of missing out on tremendous compounding growth (we have done this on this board with SHOP, TWLO, TTD, etc)… but #1 also leads to #2 which amplifies the problem.

Alteryx is a fantastic company with a fantastic product, fantastic management, fantastic balance sheet, and they’re in an industry that’s truly just getting started.

Data analytics is more important now than before COVID because it’s a “force multiplier”. It allows businesses to maximize everything from R&D to Sales and Marketing, recruiting, etc.

I’m not selling this one because I’m afraid of a short term down turn.

Because… what if we’re wrong? Anyone see Pinterest today? Up 30%+ after posting a quarter that beat lowered expectations. Alteryx could do something like that… and even if they disappoint, I’m not sure there’s a company I’m more confident in long term.

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Hi Bear,

I am seeing it pretty much the same way you are. I figure that they will come in at double the midpoint of the growth they guided to (which was 14%), at least, but I don’t see them going back to 75% growth any time soon. I have also trimmed more and am also under 8% now (at 7.5%, actually).

As far as the title of your post, which was Why Keep Alteryx? I have some thoughts.

    • They will come in WAY over guidance, even if they only grow at 30% (I think they may even beat that). They may have just been scared and super-conservative when they gave that guidance (it was the end of March and through April when the world felt like it was coming apart, after all), and they might even come in at 40%.
    • They are a Category Crusher. They are dominant in their market, and all their customers love them and benefit from having them.
    • They are continuing to innovate and have introduced their Analytic Process Automation platform.
    • And finally, if you are like me, the shares you have left are ones you bought at about $28 in a taxable account, and selling them at $173 would create a big tax expense, which might make thinking past the end of Covid make more sense.

Best,

Saul

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