Alteryx (NYSE: AYX) stock fell in Monday's trading following a rating downgrade from an analyst. The analytics and data-services company's share closed out the daily session down 9.2%, according to data from S&P Global Market Intelligence.
Piper Sandler published an analyst note on Alteryx before the market opened today, downgrading its rating on the stock from neutral to underweight. The firm kept its one-year price target on the stock at $30 per share. For comparison, the stock ended the day priced at $31.71 per share.
Why has Piper Sandler turned bearish on Alteryx?
Piper Sandler analyst Brent Bracelin issued a series of negative ratings moves on stocks in the software industry today. In addition to lowering its rating on Alteryx stock, the analyst also issued more cautious coverage on Matterport, Asana, Salesforce, and Unity Software.
In general, Bracelin is concerned about software-industry valuations. Artificial intelligence (AI) has prompted investors to warm back up to software stocks this year. But the analyst voiced concerns that the tech sector, and some stocks in particular, are at risk of seeing weak momentum or significant pullbacks.
What happens next for Alteryx stock?
On the heels of today's pullback, Alteryx stock is now down roughly 37% year to date. Even though the company's share price has seen big sell-offs, the software specialist still trades at a growth-dependent valuation.
AYX PS Ratio (Forward) data by YCharts
Alteryx is now valued at roughly 48 times this year's expected earnings and 2.4 times expected sales. While some strong performance is already priced into its current valuation, the company has seen relatively soft sales growth and high sales and marketing expenses lately.
In addition to some uninspiring business performance this year, investors also have to weigh the risk that AI will bring unfavorable disruption for the company. It's possible that AI initiatives will ultimately be major positive catalysts for the data specialist, but there's a risk that Alteryx will face heightened pressures from larger software players. The artificial intelligence revolution is poised to favor tech giants with data, infrastructure, and capital advantages, and this dynamic could curb growth opportunities for smaller software companies.
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Keith Noonan has positions in Unity Software. The Motley Fool has positions in and recommends Alteryx, Asana, Matterport, Salesforce, and Unity Software. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
