This Company Could Revolutionize Business And Deliver A Gain
The stock moved higher on the news.
Alteryx Inc. is a self-service data analytics software providing company. The company provides a subscription-based platform, enabling organizations to prepare, blend and analyze data from a multitude sources and ease data-driven decisions.
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The company democratizes access to data-driven insights to all data workers, business analysts, programmers and data scientists by expanding the capabilities and analytical sophistications.
The company’s platform allows business analysts to view underlying data, meta-data, and applied analytics at any stage during the process and is designed to interact with a wide variety of traditional data sources.
Its platform is also capable of processing data from cloud applications, such as Google Analytics, Marketo, NetSuite, Salesforce, and Workday, as well as social media platforms, such as Facebook and Twitter.
Business Wire continued, “Our track record of strong execution continued in the third quarter,” said Dean Stoecker, CEO of Alteryx, Inc.
“We are emerging as a strategic partner for enterprises across the globe looking for real-world solutions to data challenges. Looking ahead, by continuing to bring innovative technologies to market while simultaneously broadening our go-to-market reach, we believe we are setting the stage for sustainable growth.”
Third Quarter 2019 Financial Highlights
Revenue: Revenue for the third quarter of 2019 was $103.4 million, an increase of 65%, compared to revenue of $62.6 million in the third quarter of 2018.
Gross Profit: GAAP gross profit for the third quarter of 2019 was $93.8 million, or a GAAP gross margin of 91%, compared to GAAP gross profit of $56.8 million, or a GAAP gross margin of 91%, in the third quarter of 2018.
Non-GAAP gross profit for the third quarter of 2019 was $95.3 million, or a non-GAAP gross margin of 92%, compared to non-GAAP gross profit of $57.5 million, or a non-GAAP gross margin of 92%, in the third quarter of 2018.
Income from Operations: GAAP income from operations for the third quarter of 2019 was $11.9 million, compared to $9.4 million for the third quarter of 2018.
Non-GAAP income from operations for the third quarter of 2019 was $22.0 million, compared to non-GAAP income from operations of $14.3 million for the third quarter of 2018.
Net Income (Loss): GAAP net loss attributable to common stockholders for the third quarter of 2019 was $(6.2) million, compared to GAAP net income of $10.8 million for the third quarter of 2018. GAAP net loss per diluted share for the third quarter of 2019 was $(0.10), based on 64.0 million
GAAP weighted-average diluted shares outstanding, compared to GAAP net income per diluted share of $0.17, based on 65.6 million GAAP weighted-average diluted shares outstanding for the third quarter of 2018.”
The rally on the news comes as the stock reached an important support level and could mark the end of a significant pull back.
A Trade for Short Term Bulls
As with the ownership of any stock, buying AYX could require a significant amount of capital and exposes the investor to standard risks of owning a stock.
To reduce the risks of a trade, an investor could purchase a call option. This allows them to benefit from upside moves in the stock while limiting risk to the amount paid for the options. However, buying a call option can also require a significant amount of capital and includes the risk of a 100% loss.
Whenever an option is bought, the maximum risk is always equal to 100% of the amount of spent to purchase the option. Since options cost significantly less than a stock, the risk in dollar terms will usually be relatively small to own an option.
To further limit the risks of the trade, an investor could use a bull call spread. This strategy consists of buying one call option and selling another at a higher strike price to help pay for the cost of buying the first call. The spread strategy always reduces the risk of an options trade.
This strategy is designed to profit from a gain in the underlying stock’s price but has the benefit of avoiding the large up-front capital outlay and downside risk of outright stock ownership. The potential risks and rewards of this strategy are summarized in the chart below.
Source: The Options Industry Council
Both the potential profit and loss for the bull call spread are limited. The maximum loss is equal to the net premium paid when the trade is opened. The maximum profit is limited to the difference between the strike prices, less the debit paid to put on the position.
This strategy could be especially appealing with high priced stocks where the share price and options premiums are often a significant commitment of capital for smaller investors.
A Specific Trade for AYX
Every day, we scan the markets looking for trades with low risk and high potential rewards. These trades are available almost every day and we share them with you as we find them. Now, it’s important to remember these are trading opportunities in volatile stocks.
When we find a potential opportunity, we evaluate it with real market data. But because the trades are volatile, the opportunities may differ by the time you read this. To help you evaluate the current opportunity, we show our math and explain the strategy.
For AYX, the December 20 options allow a trader to gain exposure to the stock.
A December 20 $100 call option can be bought for about $7.35 and the December 20 $105 call could be sold for about $5.30. This trade would cost $2.05 to open, or $205 since each contract covers 100 shares of stock.
The amount paid to enter the trade is the largest possible loss on the trade. This is generally true whenever a trader is creating a debit to enter an options trade. “Creating a debit” means there is a cost to enter the trade. You could create a debit by simply buying puts or calls to open a directional trade.
In this trade, the maximum loss would be equal to the amount spent to open the trade, or $205.
The maximum gain on the trade is equal to the difference in exercise prices less the amount of the premium paid to open the trade.
For this trade in AYX the maximum gain is $2.95 ($105 – $100= $5; $5- $2.05 = $2.95). This represents $295 per contract since each contract covers 100 shares.
Most brokers will require minimum trading capital equal to the risk on the trade, or $205 to open this trade.
That is a potential gain of about 143% based on the amount risked in the trade. The trade could be closed early if the maximum gain is realized before the options expire.