Alteryx (NYSE:AYX) Stock a Buy: Big Data and Big Growth Potential

The corporate world is treating data like gold these days. Just look at all of the companies in the cloud-computing and data analytics space and how their stocks have performed this year to see what the market thinks of the industry’s potential. Many companies are moving into the digital age at an accelerated pace due to the current circumstances surrounding the pandemic and need a way to figure out what to do with all of their data. This is one of the big reasons why Alteryx Inc (NYSE: AYX) stock has been performing so well.

Try to imagine the difficulties related to analyzing data for a company that just moved into the cloud. Not only do they have to find an efficient way to gather their data, but they also need to determine how to clean up that data so that they are able to make business decisions that benefit the company. Alteryx makes that possible with its “Analytic Process Automation” platform and the company has a lot of growth potential as we move further into the digital age.

Solving an Important Problem

If you aren’t familiar with data analytics, it essentially means finding a way to analyze raw data so that you are able to draw conclusions and use that information to your advantage. Every company with a large enterprise system and thousands of customers needs a way to figure out what to do with all of their raw data. Just imagine the difficulties in trying to figure out how to create actionable insights from massive amounts of data related to products, customers, and internal operations. This is where Alteryx comes into play.

Alteryx is the only end-to-end data analytics platform that helps data scientists gather, manage, and analyze their data all in one place. A big plus is that it helps data workers automate some of the more monotonous tasks in their jobs so that they can focus on more important value-added work. The platform helps discover and examine data so that companies are able to improve their performance in a variety of ways. When you think about the sheer amount of data that major companies have to deal with these days, it’s easy to understand the need for a platform that helps them make sense of it all.

Huge Sales and Revenue Growth

It can be difficult to value a young growth company like Alteryx, which is why many investors focus on top-line growth versus the bottom line. Although the company reported a net loss in Q1, its top-line growth was impressive. Alteryx reported year-over-year revenue growth of 43% to $108.8 million in Q1 2020 and an industry-leading 88% gross margin which are both numbers that investors should be excited about. You also have to keep in mind that Alteryx is investing heavily in the sales and development of its platform at this time.

Alteryx has been steadily adding new clients to its recurring revenue base and reported that it gained 356 net new customers in Q1. The company currently serves 37% of companies in the Global 2000, which means they still have room to grow their customer base considerably by targeting large corporations. Some of its well-known customers include Coca-Cola, P&G, Home Depot, and Wal-Mart, which tells us that the largest and most successful corporations in the world need help with managing their data with Alteryx’s platform.

Possible Volatility

It’s hard to deny the fact that Alteryx has a compelling product and strong top-line growth, but you also need to keep in mind that most of these new-age enterprise software companies have been skyrocketing this year and might need to cool off for a bit. Q2 earnings could also end up being a mixed bag for this company since its management provided weak guidance during the Q1 earnings release. A lot of companies that Alteryx targets are holding back spending in order to weather the financial storm occurring with Covid-19, which means that Alyterx’s sales cycle could be negatively affected in the near-term.

It seems that the market is pricing in something close to perfection for the company’s Q2 earnings, which is why there could be some possible volatility for the stock in the coming weeks. With that said, adding shares of Alteryx if the stock dips into the $150s could pay off handsomely in the long-term since the company has such a promising platform that can solve a big problem for companies in the digital age.