Alteryx (NYSE:AYX) topped nearly $150 before its quarterly earnings. Investors reacted with a big slump following weak results. What went wrong?
Alteryx posted GAAP EPS of just six cents (39 cents non-GAAP). Revenue grew by 25.5% Y/Y to $129.72 million. Non-GAAP gross margin of 93% is very healthy. The fourth-quarter outlook spooked investors. After a deeper discussion on the conference call, the uncertainties may continue to hurt the stock price in the current quarter.
Management explained that shorter contract durations will lead to smaller upfront revenue recognition in the fourth quarter. Furthermore, the company posted strong annual recurring revenue of 38%, in-line with the 40% posted in the second quarter. After the stock dropped, investors considering will have to weigh the ARR and strong margins against the valuation.
The forward price-to-earnings is over 100 times while EPS growth next year is around 65%. With the buying momentum gone, AYX stock could re-test the $80 low not seen since earlier this year.
Alteryx has a favorable pricing environment in which it increased the list server price by 35% at the start of the year. Demand is strong enough to absorb the increase and lift profits for the next few quarters. As more consumers subscribe, Alteryx stock will find its way higher in the next few months.
