Despite a slight bump following better-than-expected first-quarter results, Alteryx's (AYX) stock price is down by close to 60% from its last-year all-time high. Some might consider taking advantage of the discount. But before investors buy in, they should pay close attention to the big data specialist's investor session, set for May 18-20.

It's then that the company should detail its long-term plans along with new products that could transform its portfolio.

Short-term recovery

Alteryx addresses a big data market that CEO Mark Anderson estimated will grow to "hundreds of billions" in the next few years. You should take those estimates with a grain of salt, as they depend on unknown and arbitrary assumptions. It is fair to say that, given the digitization of enterprises, there's no doubt the opportunity is large and growing. 

Man touching cloud with padlock icon on network connection.

Image source: Getty Images.

To capture a part of that growing pie, the company proposes differentiated easy-to-use products. In particular, non-specialized users leverage Alteryx's tools to manipulate big data sets and generate relevant outcomes that can lead to improving operations and sales.

However, Alteryx posted disappointing results during the pandemic, as enterprises prioritized operational activities to navigate the crisis, which suggested the company's capabilities weren't so crucial, especially for smaller businesses. So management took action to mitigate those setbacks by developing partnerships and focusing on large existing customers to expand their consumption of Alteryx's products.

These initiatives, together with the recovery from the pandemic, led to encouraging first-quarter results. Revenue increased 9% year over year to $118.8 million, way above the anticipated range of $104 million to $107 million. As a result, management raised its full-year revenue outlook by $10 million at the midpoint to a range of $565 million to $575 million, which corresponds to a 14% to 16% year-over-year increase.

New products soon

Yet beyond that better-than-expected performance, some numbers show the company will still be facing revenue growth headwinds over the next few years. 

With its focus on large existing customers, Alteryx profited from low-hanging fruits by increasing business with them. But as a consequence, it attracted only 131 net new customers, compared to 356 net new customers in the prior-year quarter. In the long term, that low addition of new customers will drag down revenue growth because the company won't be able to tap a growing pool of customers to implement its expansion strategy.  

In addition, subscription-based license revenue, which corresponds to revenue recognition during the first year a license is sold under a multi-year agreement, declined by 14.6% year over year to $43.4 million.

Granted, post-contract support (PCS), which represents the remaining ratable revenue recognition of such licenses over the lifetime of the contract, and services, more than offset that worrying development, with a 29.8% year-over-year increase to $75.4 million. But the weak sales of new subscription-based licenses will represent a headwind to PCS revenue recognition over the next few years. 

Leaving aside its focus on new customers, Alteryx's lack of as-a-service solutions may explain those challenges in attracting new customers and selling new licenses. Indeed, the company's flagship product, Designer, must be installed on customers' on-premises hardware, which becomes an important hurdle compared to equivalent cloud-native as-a-service offerings.

So with this context, Alteryx's announcements on May 18-20 will be crucial. In particular, management will discuss its road map and product strategy. It didn't provide any additional details yet, but I expect the company to reveal new as-a-service offerings to become a relevant cloud player in the big data market. Given the secular shift to cloud computing, that move now seems inevitable.

Valuation remains elevated

Despite its severe price correction since last year, Alteryx stock is still trading at a high forward price-to-sales ratio of 9.1, based on the midpoint of management's full-year revenue guidance range.

That means the market is already pricing in strong double-digit revenue growth over the next several years. Given Alteryx's attractive big data market, that's a reasonable assumption.

However, Alteryx must deliver flawless execution in updating its on-premises products for shareholders to see some upside from there. The company's Inspire event and analyst day next week will provide essential information in that regard. Stay tuned.