Atlassian Stock Gets Upgraded As Remote Work Trends Persist

Collaboration software innovator Atlassian (TEAM) is currently trading more than 50% below its peak of $483.13, mostly due to a slowdown in growth in the post-pandemic reality. Despite this, the equity research department at Barclays upgraded Atlassian shares from Equal Weight to Overweight and increased its price target from $235 to $275.   

The firm highlighted that enterprise migrations to the company’s cloud-based solutions are expected to drive long-term growth and improved margins. With a “healthier” growth profile and revenue “durability” tied to recurring cloud subscriptions, Barclays contends that Atlassian’s stock deserves a higher valuation.   

Meanwhile, other research firms remain cautious. Mizuho reduced its price target on Atlassian from $265 to $240, citing a mix of positives and negatives from its first-quarter software channel checks. Positives included increasing cloud workloads, robust cybersecurity demand, and a rise in artificial intelligence (AI) projects. However, Mizuho’s analyst also noted that many deals are being delayed and public sector demand is weakening.   

Although Mizuho maintained its Buy rating, the lowered price target reflects growing uncertainty around enterprise software spending as businesses consider potential Federal Reserve interest rate cuts. The anticipation of lower interest rates in the second half of the year may be causing Atlassian customers to hesitate on capital projects, including software investments. 

Remote Work Trends Are Alive And Well 

The trend towards a full return back to the office with limited remote work is just not a reality that will happen. According to the Pew Research Center, 41% of U.S. workers who have the ability to work from home are doing so at least part-time. Since the pandemic disrupted the traditional office model four years ago, fully remote and hybrid setups have become commonplace across various industries.  

Professions in information technology, financial services, and architecture are particularly likely to offer remote work options, which is promising for companies like Atlassian.   

Although growth has moderated from the rapid pace seen from 2020 to 2022, Atlassian continues to take advantage of strong demand for software tools that facilitate hybrid work environments. The pandemic has significantly accelerated the digital transformation globally, prompting businesses to adopt Atlassian’s broadening array of products.   

More recently, the integration of generative AI features into its flagship collaboration software has heightened customer interest. A year after partnering with OpenAI to incorporate AI into Confluence, Jira Service Management, and other Atlassian programs, generative AI is poised to become a vital driver of long-term growth. 

When Does Atlassian Announce Earnings? 

Atlassian is set to release its fiscal 2024 third-quarter financial results after the market closes on April 25, 2024. The company will aim to continue an impressive streak, having surpassed consensus EPS expectations in each of the last five quarters—an achievement that has contributed significantly to the stock recovering approximately 80% from its November 2022 low. 

In the second quarter of fiscal 2024, Atlassian reported a 21% year-over-year increase in revenue, marking its first-ever quarter with $1 billion in revenue. The company also surpassed the 300,000-customer milestone as more enterprises adopted its intelligent work productivity tools. Notable customers include Costco, Delta Airlines, and Domino’s, highlighting the broad appeal of Atlassian’s offerings.   

Currently, Wall Street’s price target for Atlassian stock stands at $255, suggesting a 27% upside from its present levels. This target reflects the optimism surrounding the company’s continued growth and innovation in the technology sector.