Alteryx, Inc.

AYX Details

Business Update: Alteryx, Inc. (NYSE: AYX) is an analytics automation company, focused on enabling people to transform data into a breakthrough. The market capitalization of the company as on 25 May 2021 stood at ~$5.04 billion. The company has recently unveiled its Global SparkED education program, which has been designed for learners of all skill levels to gain hands-on skills and certification in data analytics.

Introduction of Alteryx Ventures: On 18 May 2021, the company has announced the formation of Alteryx Ventures, which is a $50 million fund. It plans to invest in companies with innovative technology and services that complement Alteryx's analytics and data science products.

Q1FY21 Financial Update: During the quarter, the company delivered revenue growth of ~9% to ~$119 million when compared to the previous corresponding quarter. The annual recurring revenue stood at ~$513 million, reflecting an increase of ~27% on the pcp. There was also an improvement in the GAAP gross profit to $107.9 million, with a margin of ~91%. The loss from operations during the period stood at $28.8 million. The cash position was at $1 billion as of 31 March 2021. It delivered cash of ~$26 million from operating activities on Q1FY21. 

Q1FY21 Financial Performance (Source: Company Reports)

Key Risks: The company is prone to stiff competition, and as such, it should upgrade itself to the latest technological trends in order to stay relevant in the business.

Outlook: The company expects the revenue to be in the range of $111 million to $114 million in Q2FY21. It anticipates revenue to be in the range of $565 million to $575 million in FY21 and expects ARR to be ~$635 million as of 31 December 2021. It is also anticipating Non-GAAP income from operations in the range of negative $5 million to $5 million during the year.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The company has recently announced a new partnership with Tech Data in North America. The partnership provides Tech Data and its partners' access to the Alteryx platform. The company has appointed Paula Hansen as its Chief Revenue Officer, on 10 May 2021. The stock of AYX is trading below its average 52-weeks’ levels of $185.75-$73.32. The stock of AYX gave a negative return of ~11.93% in the past one month and a negative return of ~1.64% in the past one week. On a technical analysis front, the stock of AYX has a support level of ~$73.110 and a resistance level of ~$84.431. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight premium to its peer median EV/Sales (NTM Trading multiple), considering the improvement in the financial & margin performance and key formation of key strategic partnerships. For the purpose, we have taken peers such as Oracle Corp (NYSE: ORCL), Splunk Inc (NASDAQ: SPLK), Datadog Inc (NASDAQ: DDOG), to name a few. Considering the expected upside in valuation and current trading levels, decent performance in Q1FY21, growth in cash from operations and key strategic partnerships, we recommend a ‘Buy’ rating on the stock at the closing price of $75.150, down by 1.29% as on May 25, 2021.

AYX Daily Technical Chart, Data Source: REFINITIV

JFrog Ltd.

FROG Details

Award of Certification: JFrog Ltd. (NASDAQ: FROG) is a software company and the creator of the DevOps platform. The market capitalization of the company as on 25 May 2021, stood at ~$3.63 billion. As per a recent update, the company has achieved the Red Hat Vulnerability Scanner Certification for JFrog Xray, which provides scanning for open-source security vulnerabilities and license compliance. The certification enables firms using the JFrog DevOps Platform to experience improved assurance and validates that the license compliance data identified by JFrog Xray is accurate and consistent.

Q1FY21 Results Update: The company delivered impressive performance during the period, with growth of ~37% in revenue to $45.1 million when compared to $32.8 million in the previous corresponding quarter. The GAAP gross profit stood at $36.7 million, with a gross margin of 81.3%. It reported a GAAP operating loss of $10.6 million during the period. It posted operating cash flow at $8.8 million, with a free cash flow of $7.7 million in Q1FY21. FROG ended the period with a cash position of $605.7 million as of 31 March 2021.

Q1FY21 Financial Performance (Source: Company Reports)

Key Risks: The company's line of business exposes it to the risk of technological breaches with respect to its systems and data.

Outlook: The company expects the revenue to be between $47.6 million and $48.6 million in Q2FY21 and anticipates the Non-GAAP operating income to be between $0.5 million and $1.5 million. For the full year FY21, it expects the revenue to be between $198 million and $204 million, and Non-GAAP operating income between $5 million and $7 million.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:  The company has recently announced that it will expand its presence in the Asia-Pacific (APAC) region to accelerate its services and offerings with customers and local partners in the region. The stock of FROG is trading below its average 52-weeks’ levels of $95.2-$33.38. The stock of FROG gave a positive return of ~2.47% in the past one week and a negative return of ~26.02% in the past one month. On a technical analysis front, the stock of FROG has a support level of ~$36.15 and a resistance level of ~$43.31. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at some premium to its peer average EV/Sales (NTM Trading multiple), considering the robust financial performance, decent cash position and expansion in key markets. For the purpose, we have taken peers such as Datadog Inc (NASDAQ: DDOG), MongoDB Inc (NASDAQ: MDB), Dynatrace Inc (NYSE: DT), to name a few. Considering the valuation and current trading levels, impressive financial performance, decent cash position, optimistic earnings guidance and expansion in the Asia-Pacific region, we recommend a ‘Buy’ rating on the stock at the closing price of $38.89, up by 0.36% as on May 25, 2021.

FROG Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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