Atlassian stock price held steady and is up for two consecutive weeks as focus turns to its upcoming financial results. TEAM shares jumped to a high of $265 on Friday, up by almost 100% from its lowest point in 2024. So, is Atlassian a good investment ahead of earnings?
Atlassian earnings ahead
Atlassian, the parent company of Jira, Confluence, Loom, and Trello, is one of the most popular software companies globally. It has also grown to become the sixth biggest company in Australia after Commonwealth Bank, BHP, CSL, National Australian Bank, and Westpac.
The company’s business has done well over time as more large and SME companies embraced its technology. Its annual revenue grew from $1.6 billion in 2020 to over $4.3 billion in the last financial year.
This growth happened as more companies embraced its communication, collaboration, and project management solutions. Some of its top clients are companies like Mercedes-Benz, Dropbox, Lumen, and Royal Carribean.
The next key catalyst for the Atlassian stock price will be the upcoming earnings, scheduled for January 30. Analysts expect these numbers to show that the company’s business continued to perform well in the last quarter.
The average revenue estimate is $1.24 billion, up about 17% from the same quarter in 2023. This is impressive for a technology company established in 2002.
The company’s guidance is that its revenue will be $1.32 billion in the next quarter, while its annual revenue will be $5.12 billion. It will hit $6.13 billion in the next financial year, a strong performance.
Read more: Atlassian’s stock upgraded by Piper Sandler to Overweight: Buy opportunity?
TEAM earnings growth and valuation
The most recent results showed that Atlassian’s revenue rose from $977 million in the first quarter of 2023 to $1.18 billion. Its gross margin eased slightly from 81.8% to 81.7%, while its net loss jumped to $123 million.
The company also announced that it will continue to repurchase its stock. After completing its $1 billion repurchase, it initiated a $1.5 billion share repurchase program. It hopes that these repurchases will help to reduce the outstanding share count and boost its earnings per share.
A key concern has always been that Atlassian’s business is highly overvalued since it has a market cap of over $68 billion. This figure means that its forward P/E ratio of 80.8, higher than the industry average of 26. It is also higher than other companies like NVIDIA and Microsoft.
TEAM is a SaaS company, meaning that rule of 40 is an ideal approach to value it. The rule-of-40 approach looks at a company’s growth and adds with its margins. It has a revenue growth of 20.14% and a net income margin of minus 9, giving it a figure of about 11. On the positive side, using the free cash flow margin of 32 gives it a rule of 40 figure of 52.
Atlassian stock price
The weekly chart shows that the TEAM stock price formed a slanted double-bottom pattern whose neckline was at $257. This highly popular pattern often leads to more gains over time.
The stock has moved above the key resistance point at $257, the highest swing in January 27 and slightly above the 38.2% Fibonacci Retracement level.
Most importantly, it has formed a golden cross pattern as the 50-week and 200-week moving averages flipped each other. The stock has also formed a bullish pennant chart pattern.
Therefore, the stock’s outlook is bullish. The initial target is $287.35, which was its highest swing on December 2. It will then jump to the 50% retracement point at $300.
The post Atlassian stock analysis: is TEAM a buy or sell ahead of earnings? appeared first on Invezz
