Buy Beaten-Up Alteryx Stock Before It Soars Back to $200

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In 2020, the stock market crashed on fears that the Covid-19 pandemic was a “world-ender.” Then markets rebounded sharply as those fears proved overstated. Most stocks today trade at or near their pre-Covid levels. But not Alteryx (NASDAQ:AYX), as AYX stock has taken investors on a ride this year.

a cityscape at sunrise connected by 1's and 0's with implied internet connection points. representing ayx stock

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a cityscape at sunrise connected by 1’s and 0’s with implied internet connection points. representing ayx stock

The data analytics provider has seen its stock price get crushed amid the Covid-19 pandemic. That’s because many enterprises apparently view data analytics spend as discretionary spend, and enterprises have — amid a drop in business activity in 2020 — cut back on discretionary spending. This has led to a material slowdown in Alteryx’s growth trajectory over the past few months, which has simultaneously resulted in an Alteryx’s stock crash.

Unlike the rest of the market, Alteryx shares have not bounced back.

chart, line chart: Alteryx stock chart.

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Alteryx stock chart.

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But, zooming out, the big-picture growth narrative surrounding Alteryx stock has not changed. Data is still the future of the economy. Alteryx is still a top-tier provider of data analytics solutions. The platform will continue to see robust adoption over the next several years as every company turns into a data-driven organization. Revenues and profits will keep powering higher. So will the AYX stock price.

To that end, you shouldn’t stress the recent sell-off in Alteryx stock. Instead, you should embrace it. Buy the dip. Wait for near-term headwinds pass. And let long-term tailwinds push this winning stock back to $200.

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Here’s a deeper look.

Data Is the Future

Many people believe that money is at the heart of business. But it’s not. In the business world, data is king.

Data can help businesses create better products, enhance marketing campaigns, and reach targeted customers.

Data can help businesses optimize supply chains, streamline business functions, and automate various processes. It can help businesses mitigate risk, predict business outcomes, and glean consumer sentiment.

For a business, data can do everything.

It should be no surprise, then, that a 2020 Forrester Consulting survey found that data-driven organizations are 58% more likely to beat revenue goals than non-data companies.

Yet, a 2019 New Vantage survey found that only 31% of companies have pivoted to data-driven decision making — and because their peers are outperforming them in everyway, the implication for non-data businesses is obvious: pivot to data-driven decision making, or fail.

Gallery: The 10 Top Stocks to Buy For Q4 (InvestorPlace)

The third quarter of 2020 is in the books. It was a solid quarter with many investors keeping an eye on stocks to buy for fourth quarter. The S&P 500 rose 8.5%, the Dow Jones rose 10.8% and the Nasdaq rose 11%. The Nasdaq is now up 26% year-to-date, the S&P 500 up 5% and the Dow just one good day away from positive territory. But there’s no time to celebrate those returns. We have an election coming up. A coronavirus pandemic to worry about. Renewed tensions with China to monitor. A stimulus bill that’s hanging in the balance. It’s time to ask the most important question on everyone’s mind: what are the top stocks to buy for Q4? Here are my top 10 picks: Alteryx (NASDAQ:AYX) Chegg (NASDAQ:CHGG) Gores Metropoulos (NASDAQ:GMHI) Sirius XM (NASDAQ:SIRI) Facebook (NASDAQ:FB) Else Nutrition (OTCMKTS:BABYF) GrowGeneration (NASDAQ:GRWG) Zuora (NASDAQ:ZUO) Shopify (NYSE:SHOP) Under Armour (NYSE:UAA) I think all five of these top stocks to buy have a good chance of rising 20% or more in the fourth quarter alone.

Stocks to Buy: Alteryx (AYX)

First up on this list of stocks to buy is Alteryx. Alteryx provides low-code data science and analytics applications for enterprises so that companies can more easily analyze and glean valuable, actionable insights from their business, consumer and machine data. The company is a long-term winner powered by secular demand tailwinds in the Data Economy, wherein every company in the world is turning into a data-driven organization and leaning into data to drive better business outcomes. Alteryx provides best-in-breed tools which help companies do just that. To that end, uptake of the Alteryx platform will remain robust for many years to come. Revenues and profits will charge higher. But AYX stock has been knocked down in 2020 because of a pause in enterprise spending, which has weighed on Alteryx’s growth rates. This pause won’t last. Enterprise spending trends are already normalizing as economic activity rebounds. This will show up in Alteryx’s third quarter numbers, and better-than-expected Q3 numbers will get this long-term winning stock back on track. A rebound in AYX stock back to the $200 level is likely before the end of the year.

Chegg (CHGG)

Chegg has a created an all-in-one, end-to-end connected learning platform that has transformed into a virtualized student resource center, complete with online homework, e-textbooks, on-demand tutoring, a virtual math solver and much, much more. Amid a broad pivot towards online education during the Covid-19 pandemic, Chegg’s growth rates have meaningfully accelerated, and CHGG stock has taken off like a rocket ship. However, these rocket-ship gains have cooled off recently, mostly because investors are worried that students (specifically, college students) won’t go back to school in the fall — and therefore won’t need a Chegg subscription. But students are going back to school. And the school they are going back to is a hybridized one, with as much virtual learning as physical learning. In the hybrid education world, Chegg’s connected learning platform becomes infinitely valuable as a companion academic resource for students. Thus, I fully expect Chegg’s red-hot growth trajectory to stay hot into the end of the year. As it does, CHGG is one of the stocks to but and will likely rebound back to ~$90 levels.

Gores Metropoulos (GMHI)

Gores Metropoulos is a special purpose acquisition company (SPAC) that is set to acquire Luminar Technologies — a leading LiDAR company — in the fourth quarter of 2020. According to my sources in the self-driving space, Luminar makes the industry’s best independent long-range and interference-free LiDAR sensors, which means that of all the LiDAR makers out there, Luminar is the most likely to be broadly adopted in self-driving applications at scale. Gores’ acquisition of the Luminar will officially close in the fourth quarter of 2020. Once it does, the market will get really excited about Luminar, its sensors, and its upside potential in self-driving end markets. As that happens, I think GMHI stock — which will eventually turn into LAZR stock — will soar, possibly all the way to $15+.

Sirius XM (SIRI)

Sirius XM provides an in-vehicle entertainment platform that mostly centers around premium radio stations. This business has naturally been hit hard amid the Covid-19 pandemic, because consumers are working from home, traveling less, and overall spending less time in their cars. That’s why — for the first time in several years — Sirius XM has seen its subscriber base shrink in 2020. This won’t last. Work-from-home is a permanent shift. Reduced consumer mobility is not. Once the pandemic clears up, work-from-home employees will run more daytime errands, go out to dinners on Friday nights, embark on more road-trips, so on and so forth. Humans’ thirst for travel and experiences is simply too great to be reduced in any meaningful capacity for an extended period of time. I think this stock rebounds to around $8 by the end of 2021, and that this huge 60% rebound starts in the Q4 of 2020.

Facebook (FB)

Facebook needs no explanation. It’s Facebook. Chances are you use one or several of its apps — Facebook, Instagram, WhatsApp and Messenger — for several hours every day. The bull thesis on FB stock in the fourth quarter of 2020 rests on one major catalyst: Instagram Reels, a short-video feature which is essentially Facebook’s copycat of TikTok. Facebook management hopes that Reels will do to TikTok in 2020/21, what Stories did to Snap (NYSE:SNAP) in 2016/17 — which is essentially steal all of the viral app’s engagement and channel it into the Instagram ecosystem. I think that’s exactly what will happen. There’s already a huge exodus happening on TikTok. Reels engagement is flying higher. The beginning of this TikTok-to-Reels transition has already begun. As it continues over the next few months, it’ll show up in Facebook’s earnings report via better-than-expected user and revenue numbers. That will, of course, spark big gains in FB stock, which still remains one of the most attractively valued growth stocks in the market.

Else Nutrition (BABYF)

Else Nutrition is a maker of the market’s first plant-based infant milk formula. The company just launched this novel plant-based infant milk formula in North America late in the third quarter, and coordinated a bunch of influencers in the parenting and healthy eating categories to promote the new product. My feeling tells me that given the rapid rise in vegan eating among Millennials and a surge in the number of Millennial parents, a lot of Millennial parents will buy Else Nutrition milk formula in the fourth quarter. As they do, Else Nutrition will report blowout quarterly numbers, which should really get this company’s long-term growth narrative started and send BABYF stock to the moon.

GrowGeneration (GRWG)

GrowGeneration is a hydroponics retailer in North America set up to one day be the go-to supplies store for cannabis growers. Given the company’s “picks-and-shovels” nature and exclusive exposure to the U.S. cannabis retail market, I see GRWG stock as an explosive pure-play on the U.S. Presidential Election. That is, if Joe Biden wins the election and we get a Blue Wave across Washington, that will lay the foundation for national legalization of cannabis in the U.S. All pot stocks will jump on the catalyst. None more so that GRWG stock, because of its exclusive hyper-focus on supplying the U.S. cannabis market with necessary growing materials. To be sure, Biden has to win in order for this stock’s Q4 bull thesis to play out as expected. I’m not saying that will happen. But if you think it will, GRWG is one of the best stocks to buy for Q4.

Zuora (ZUO)

Zuora is an enterprise software platform which provides cloud-hosted solutions that enable companies to pivot to subscription business models. The bull thesis on Zuora stock is very similar to the bull thesis on Alteryx stock. That is, Zuora is a long-term winner that is going through an near-term rough patch thanks to depressed enterprise spending trends. Thanks to secular growth trends promoting more ubiquitous enterprise adoption of subscription business models, ZUO will recover. These depressed enterprise spending trends won’t last. Secular tailwinds underpinning broader adoption of subscription business models will. Over the next few months, Zuora’s growth trends will meaningfully recover as enterprise spending trends recover. As that happens, ZUO stock will rebound to $20 — and I think that big rebound starts in the fourth quarter of 2020 with a strong earnings report.

Shopify (SHOP)

Shopify is an e-commerce solutions provider which helps merchants and retailers of all shapes and sizes establish and maintain strong omni-channel operations. This holiday shopping season will look very weird. People are going to spend money, because the labor market is rebounding, consumers have been saving forever and borrowing costs are at all time lows. Plus, the economic outlook is only improving and consumer confidence is rising. But, people aren’t going to spend money in stores, partly because they don’t want to be in crowds, and partly because many of these stores will be closed during the season’s traditionally busiest days. Instead, consumers are going to shop a lot online this holiday season. Of course, that’s a good thing for all e-retailers. But it’s an especially good thing for Shopify, because its core customer base (small- and medium-sized merchants) usually sell a lot of product in-store during the holiday season, so the shift to online for these sellers will be particularly large. Shopify’s holiday numbers will blow estimates out of the water. As they do, SHOP stock will soar.

Under Armour (UAA)

The final company on this list of stocks to buy is Under Armour. Under Armour is an athletic apparel brand best known for its performance shoes and clothes. The company has been plagued by branding problems for years, as the company — in an attempt to make up for the fact that it missed the athleisure wave — started selling into lower priced channels like Kohl’s (NYSE:KSS). But all that did was dilute brand equity and result in continued sluggish growth at the company. Amid the novel coronavirus pandemic, however, Under Armour is finally fixing its huge branding problem. The company is going to re-elevate brand equity by reducing reliance on off-price channels, fleshing out a more robust direct-to-consumer (DTC) sales channel and launching more premium branded products with the brand’s athletes. These moves will help the Under Armour brand come back to life over the next few years, and this resurgence should start with a strong holiday shopping season. As it does, UAA stock should finish 2020 out with a bang.

On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.

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11/11 SLIDES

Thus, over the next several years, you will see every business in the world turn into a data-driven organization, and so the Intelligence Economy — a new era wherein enterprises are unlocking the power of big data to drive better business outcomes — will emerge and become ubiquitous.

At the heart of this Intelligence Economy is Alteryx, meaning that AYX stock has big long-term potential.

Alteryx Is a Winner in the Intelligence Economy

In the Intelligence Economy, tools which help companies glean value from the vast amount of data at their fingertips, and turn it into actionable insights, will become immensely useful. Indeed, they will become mission-critical.

To that end, data science platforms will reach enterprise ubiquity over the next decade, as every single enterprise will lean into data analytics to develop competitive advantages and optimize operating efficiency.

Alteryx provides these tools. And it is the best in the business at doing so, year in and year out, mostly because it’s a very easy-to-use, code-free platform that is simultaneously very robust, comprehensive and powerful, and which can be mixed and matched with essentially any data set.

Yet, only 37% of Global 2,000 companies use Alteryx’s platform. Those companies are presumably developing competitive advantages over the 63% that aren’t. They either aren’t using data analytics to drive successful outcomes and/or they are using an inferior product.

Consequently, secular growth drivers and competitive dynamics will promote broader adoption of Alteryx’s platform over the next several years. Broader adoption will drive sustained robust revenue growth. Scalability inherent to the company’s SaaS model will turn robust revenue growth into even more robust profit growth through positive operating leverage and margin expansion.

This, in turn, will sustain long-term strength in AYX stock.

Recent Weakness Won’t Last

Alteryx stock got hit hard in 2020 because the company’s second quarter earnings report wasn’t up to snuff, mostly thanks to the fact that — as mentioned earlier — enterprises cut back on discretionary spending amid a drop-off in broader economic activity.

But economic activity is now normalizing. Enterprise spending is rebounding. Consumer spending is rebounding (so companies are earning more money, which means they can spend more money again). Business confidence is rebounding (which means companies are again more comfortable upping spend).

All that means that companies are going to re-up discretionary spending over the next few quarters. As they do, they will spend more and more money on data science platforms and services like Alteryx.

Alteryx’s growth trends will meaningfully accelerate. Second-half 2020 numbers will come in way above expectations. AYX stock will pop.

Big Upside Potential for Alteryx Stock

By my numbers, Alteryx stock is way undervalued today.

Secular big data tailwinds and built-in Alteryx platform advantages will help this company sustain double-digit revenue growth for the next several years. Given the robust scalability of this software business model — which features 90% gross margins — sustained positive operating leverage will turn that double-digit revenue growth into 15%-plus profit growth.

Assuming so, then my modeling suggests that Alteryx will hit $8.45 in earnings per share by 2030. Based on 35-times forward earnings multiple and an 8.5% discount rate, that implies a 2021 price target for AYX stock of more than $150.

In this market, it’s not unlikely to see growth stocks firing on all cylinders be rewarded with premium valuations. Alteryx stock will likely be no exception to that trend. As such, I think prices closer to $200 are totally doable for AYX stock over the next 12 to 15 months.

Bottom Line on AYX Stock

Alteryx stock is a long-term winner going through an ephemeral rough patch. Buy AYX stock today while things are rough. Let these bad times pass. Let the good times come back. And watch the stock rebound all the way to $200.