What Happened:
The shares of data analytics and automation platform, Alteryx, surged by 17% in the afternoon session following a report by Reuters stating that the company is working with an investment bank to explore a potential sale. Investment bank Qatalyst Partners is advising Alteryx during the discussions with potential acquirers. While there has been initial interest, Alteryx’s valuation expectations must still be met, raising the possibility that the discussions may not result in a deal, according to Reuters. An acquisition in the SaaS sector could be seen as a positive signal for the whole industry, indicating constructive views on both fundamentals and valuation.
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What is the market indicating:
Alteryx’s shares experience high volatility, with 30 moves greater than 5% over the past year. However, moves of this magnitude are rare, even for Alteryx, suggesting that this news significantly impacted the market’s perception of the business.
30 days ago, we reported on a major move when Alteryx’s stock dropped by 25.3%. This drop was due to the company’s second-quarter annual recurring revenue (ARR) missing Wall Street’s estimates, despite beating revenue and EPS expectations. Additionally, the company provided weak guidance across all areas. Guidance for next quarter’s ARR, revenue, and non-GAAP operating income all fell short of expectations. Notably, full-year guidance was downgraded across the board, which is generally unfavorable.
Management attributed the disappointing results to changes in buying behavior, particularly with large customer expansions outside the renewal cycle, as well as macro and sales execution issues. This commentary raises concerns about the near-term outlook for Alteryx, as the slower buying patterns appear to have just begun. Overall, it was a challenging quarter for the company, and the market is struggling to digest the implications of the missed guidance.
Following these results, Alteryx received two downgrades from Wall Street analysts. Loop Capital downgraded the stock’s rating from Buy to Hold and lowered the price target from $65 to $30. Similarly, Piper Sandler analyst Brent Bracelin downgraded the stock’s rating from Overweight (Buy) to Neutral (Hold) and also lowered the price target from $68 to $30. Bracelin’s decision was influenced by the Q2 ARR shortfall ($14M miss), which was caused by a shift in customer behavior making standalone expansions challenging. This made it difficult to forecast the future growth trajectory of the business.
Alteryx’s stock has declined by 30.6% since the beginning of the year and is currently trading at $34.64 per share, which is 50.2% below its 52-week high of $69.52 reached in February 2023. Investors who purchased $1,000 worth of Alteryx shares 5 years ago would now have an investment worth $583.37.
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