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Here's Why Alteryx Stock Sank on Earnings and Why it Doesn't Matter

By Danny Vena and Jason Hall - Feb 25, 2021 at 1:00PM

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Sometimes a stock move doesn't reflect the company's performance.

Expectations were high going into Alteryx's (AYX -5.39%) fourth-quarter financial report, particularly given the company's massive beat in Q3. The data science and analytics provider delivered results that exceeded both management's forecast and analysts' consensus estimates. Yet in the wake of its better-than-expected performance, the stock fell 16%.

On this clip from Motley Fool Live recorded on Feb. 10, "The Wrap" host Jason Hall and contributor Danny Vena dig into the results and explain why investors should be focused on the long term.

Jason Hall: As I predicted, our most thumbed-up question, stock, absolutely tanked today Alteryx (AYX -5.39%) stock down 16%, reported earnings. Danny, what happened, how do we think about this, what's going on, what are your thoughts?

Danny Vena: Well, first I want to say that this is much to do about nothing to an extent. When you look at what Alteryx did, they reported revenue of about $161 million, which was up about 3% year-over-year. It beat both the company's guidance and analysts' consensus estimates.

For the full-year revenue was close to $500 million and up about 19%, but here's the thing. To put that in perspective, last year was a tough one for Alteryx. If you look at back in 2019, revenue grew 65% year-over-year and growth slowed, decelerated to about 19% in 2020.

There was still a lot of good news there. The annual recurring revenue was up about 32%. So the core business is still solid. Their customer base grew about 16% year-over-year. Net expansion rate, which signifies what existing customers are spending this year versus last year, was up about 22%.

Now, I think the biggest thing that is holding back the stock right now and send it tumbling was the fact that guidance was quite a bit weaker than what was expected. The company came out and said revenue for the first quarter was going to be a range of $104 million to $107 million. Analysts' consensus estimates were about $119 million.

Then their loss, our GAAP [generally accepted accounting principles] loss from operations is expected to be between $18 million and $21 million. If you put that in the context of last year, they had an adjusted loss of only $6.5 million. A lot of this had to do with expectations.

The company had a tough time last year. Not all of the companies came onboard. Alteryx offers a suite of cloud-based products that led companies aggregate data from different sources and then analyze the data. And as soon as companies started cutting back a bit, that's one of the places where they cut back.

Alteryx has technology that is going to be very useful in the future. I think that once we get out of the economic uncertainty, companies are going to be back on board. In the meanwhile, expect more weakness out of the company. But the biggest thing that caused that 16% decline was the fact that guidance was weaker than what the market wanted.

Jason Hall: Yes, thanks Danny. It's interesting if you look at this business. You're right that it falls in a bit of a bucket that with just the macro environment, it's a place that people can or companies can cut their spend a little. So that's been affecting it. The stock's down 15% over the past year. Crazy volatile. We are on a huge run over the summer and it's down like 33% from the 2020 high right now. Personal opinion here. Do you see this as an interesting one maybe to think about buying right now?

Danny Vena: I actually own Alteryx stock and I actually bought it at this price a couple of years back.

Jason Hall: There you go. It sounds like a good price to me.

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