Is Alteryx a Sell After Its Disappointing Quarter?

Alteryx (AYX) finished off 2019 with a bang and amazing 75% year-over-year revenue growth. But what a difference a year makes. Its Q4 2020 result only saw revenue grow at a paltry 3%, leaving investors wondering if its stock is one for the garbage bin. On this Motley Fool Live video segment recorded on Feb. 11, Motley Fool contributors Brian Stoffel and Brian Withers take on the question of whether it's time to sell this data analytics specialist's stock after its disappointing quarter.

Brian Stoffel: "Is Alteryx a sell based on this quarter?"

I'll start and I'll just say, well, we can't give recommendations for any individual investors. But what I'll say is that I don't own the stock. So I think that's probably the most important data piece as far as my opinion goes. The other thing that I will say is that the stock is a lot cheaper on a price-to-sales, price-to-free-cash–flow basis than it was a year or a year and a half ago. It's still expensive by traditional metrics but if this team can turn it around, today's price might look like a pretty good deal, what do you think, Brian?

Brian Withers: Yeah, [there's] certainly the tailwinds of the data analytics. Data analytics is only going to become more prevalent and more required as companies try to figure out how to do more with less. And these software platforms are incredibly empowering to the data analysts who use them. So I think the platform is absolutely critical. It's really just a management question of whether management is going to kind of step up and be able to do this, at least from the customer's perspective.

I sold some of the stock a month or two ago and it was really around [CEO] Mark Anderson was doing a little bit waffling with the whole cloud deal. I wanted to have a company that was already in the cloud or further along in their cloud journey than Alteryx is.

At this point, it's a bet on management. There's a lot of, "We're going to do this." If you're not in the stock, you may want to wait and see how next quarter comes out or if you have some experience with Mark Anderson and confidence in the team and his direction, it might be a good time to buy.

Brian Stoffel: To your point, Brian, we have a comment here on Slido that says,

The real unfortunate part of this is that the product is excellent and fairly easy to use for non-computer types and fully featured for analysts and others. It's just not sold properly.

I think if we were to kind of encapsulate all of this in just a couple of sentences will be apparently [it has a] really great product and they're transitioning [to new management]. Their founders have run the company for the last 20 years and now you see Olivia [Duane Adams] is in a different role. I think Dean Stoecker was the CEO or he is on the board now, but he is not running the day-to-day.

The big thing here is, hey, there's a new team and they are going to look for better ways to sell this product that looks pretty good. The crazy-making part of that is when it comes down to so much about what individuals are going to do while they're there, it's very hard to predict. So it's just like you said, it really if they figure out a way to do this transition in a way that makes sense. It could be off to the races. If they don't, if they struggle, the stock could struggle.

Brian Withers: Yeah. Even if they could [succeed] through this transition, if they, rush too fast, could potentially even tick off current customers who are very happy with what they have. So it's a very, it's a "watch closely" kind of company [for investors]. It's super interesting to me and Brian, I know that you've kind of kind of looked into it. I feel the pain of the data analyst and know what a great product. So I'm cheering for them to succeed. It'll just be a while until we see whether that really happens or not.

Brian Stoffel: Here we go. Alteryx entered 2020 as a growth stock. It leaves it as a turnaround story.