Last Thursday I chose Alteryx (AYX - Free Report) , the $6 billion "self-service" data analytics platform, as my target for a Zacks Bull of the Day feature to be published the next day. And I wasn't even aware that the $2.6 billion acquisition of Looker by Google Cloud that morning was the spark about to ignite my AYX shares 20% in a matter of days.
The next day, Friday June 7, Goldman Sachs initiated coverage of AYX with a Buy rating and $110 price target.
By the weekend, as I caught up with the implications of the Looker story, here were the notes I gave my TAZR Trader members on how M&A fever could heat up for other analytics "picks and shovels"...
After Google bought a private business intelligence (BI)/data analytics platform called Looker for $2.6 billion, or ~15X sales, the analyst team at D.A. Davidson put together a good summary of the deal and highlighted AYX as a clear potential target...
More Cloud M&A to Come?
The D.A. Davidson team, led by Rishi N. Jaluria has followed the Looker story closely for the past few years and has been impressed with the business, with a $100M run-rate and 70% year-over-year growth. Strategically the acquisition makes sense, especially given the integration between Google BigQuery, the company's cloud data warehouse, and Looker, and they have long expected Google Cloud Platform (GCP) to turn acquisitive under new CEO Thomas Kurian.
Some of the team's key observations...
While GCP has impressive technology, it has seen limited enterprise traction, especially relative to AWS and Azure, and they view M&A as an important part of GCP's strategy going forward. They also believe the acquisition may signal increased M&A appetite by the hyperscale cloud vendors (AWS, Azure, GCP) to buy more software companies.
The D.A. Davidson analysts also expect targets for cloud vendors to be more at the infrastructure, data, API, and analytics layers, as opposed to pure application vendors. Within their coverage universe, they view AYX and NewRelic (NEWR - Free Report) as the most likely M&A candidates, with MongoDB (MDB - Free Report) and OKTA representing a "wish list" that may be less likely because of their high valuations. In addition, they continue to see an outside chance that AWS or Microsoft attempt to buy WDAY again.
Salesforce.com Throws Down vs. Google and Microsoft
Then Monday, Salesforce.com (CRM - Free Report) announces their deal to buy Tableau for $15.3 billion. And over those three trading sessions from Thursday through Monday, AYX shares vaulted from $87 to $106.
But the stock couldn't keep the gains as other i-banks like Wedbush and Raymond James were less enthusiastic with Neutral and Market Perform ratings on AYX, believing that valuation and competition should keep investors cautious.
Then Tuesday, Alteryx started rocking the house at their conference/celebration in Music City. Here's what I told my folks that night...
Alteryx: A Data Engine Driving New Productivity & Collaboration
Alteryx is down in Nashville this week for their 5-day annual user conference, Inspire U.S. 2019, taking place June 10-14 at the Gaylord Opryland Hotel.
The hour+ investor session was hosted by CEO Dean Stoecker, CFO Kevin Rubin, and SVP of Product management, Ashley Kramer.
I had already spent the better part of the day becoming more familiar with the innovation and disruption of this company, and so this session was the clincher for me to buy more shares.
The real rock star was Kramer, who came from Tableau. I hope I can find a transcript of her section because she knows her data analytics stuff -- and she talks fast.
She is so knowledgeable, confident and such a great communicator that I imagine she will probably be poached for a major CEO position within 5 years.
In the 49-slide deck the team used, hers are the most interesting and thought-provoking. I was especially rocked by this stat: 50% of data science models never get deployed.
Kramer really breaks down for investors in her 25 slides what the Alteryx platform does for employees to discover and harness their data. The company literally has people telling them "You changed my career... you made my job interesting again... I can't thank you enough!"
Rubin the CFO dropped these long-term targets "nuggets" for investors and analysts...
Operating margin target of 35%-40%
Gross margin target of 90%-92%
R&D target of 15%-17%
Free cash flow margin target of 30%-35% of revenue
And CEO Stoecker embodies the company mission to democratize analytics for what he calls the "citizen data scientist." Searching for this term, I found it actually was coined by Gartner, who defines a Citizen Data Scientist as “a person who creates or generates models that leverage Predictive or Prescriptive Analytics but whose primary job function is outside of the field of statistics and analytics.”
Stoecker's mission is to get 50 million "data workers" out of spreadsheet hell and into fast-moving tools that can help them find, collect, clean, blend, crunch, analyze, "munge" and share their data in the most efficient and powerful ways possible.
He even recognizes after 2 decades that data science is a social process, not a dry, abstract numbers-only game. Discovering data insights actually brings people and teams together in exciting collaborations to drive their work and business.
I also found a good interview with him on MadMoney in March where he explains this quote...
"If the world is going to get eaten by machine learning, people aren't going to need visualization. What they're going to need are pipelines that allow you to deploy ML algorithms without writing any code."
Stoecker emphasizes how the Alteryx platform is in the middle of the software stack between data providers and data users. They can be agnostic to any integration because they provide power tools -- actually, the engine -- to get any data job done for any platform.
Alteryx Customer Growth & Happiness Data Getting Clearer for Wall Street Analysts
Okay so this morning after the company presentation, new product reveals, and seeing/hearing ecstatic Alteryx customers, several i-bank analysts were out with notes and improved outlooks.
And others, like the team at Wedbush, still think that CRM + DATA is bad news for AYX in a smaller TAM (total addressable market) than some imagine. Here were the more positive views...
Citi analyst Tyler Radke doesn't see a competitive bidding process for DATA. In short, it’s CRM's to take. And Radke continues to favor Alteryx as his "top pick" given the company's combination of "strong top-line growth paired with near best-in-class unit economics and profitability." He also believes Alteryx's market opportunity may be underestimated, as you will see I do in my article from last week.
Needham analyst Jack Andrews raised his price target on Alteryx shares to $120 from $108 after attending the company's annual customer conference, during which management provided an updated long-term operating model. Additionally, customer conversations were "extraordinarily positive," Andrews tells investors. He maintains a Buy rating on Alteryx, noting also that the company introduced three new types of functionality during the event.
Disrupt Yourself: The Gold Rush is Internal
For a lot more details on the Alteryx model, customers, and news from Inspire, be sure to watch the video that accompanies this article.
I show some key slides from the Kramer presentation, including her opening slide with a quote that explains why 50% of the S&P 500 will be disrupted unless they learn the new rules of the Data Economy.
To my mind, there's a gold rush going on and it's inside of each company's own data. They must learn to mine it and harness it or get their lunch eaten by the younger companies that grew up with data analytics as second nature.
Luckily, the founders of Alteryx have been at it for over two decades and they keep attracting top talent, like Kramer from Tableau, to get better at it.
Disclosure: I own shares of AYX for the Zacks TAZR Trader portfolio.
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