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Why Atlassian (TEAM) is a Strong Contender for Portfolio Pick
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Atlassian (TEAM - Free Report) is a stock that investors should consider adding to their portfolio to benefit from its upside potential.
Tech stocks made a remarkable run in 2023 after a massive sell-off in 2022 on recession concerns, inflationary pressure, increased oil prices and higher interest rates. Atlassian was one of the beneficiaries of last year’s tech rally, which soared 84.8% in 2023, outperforming the Zacks Computer and Technology sector’s rise of 53.8%.
The stock also outpaced the return of major stock market indexes, including the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite, which gained 13.7%, 43.4% and 24.8%, respectively.
The surge reflects investors' confidence in TEAM's strategic positioning, robust financial performance and sustained focus on expanding its product portfolio that caters to customers’ needs amid the ever-changing landscape of workforce and project management.
The company has experienced continuous growth in both revenues and profits over the past several quarters, driven by high demand for its solutions. Atlassian has an impressive earnings surprise history. It outpaced estimates in each of the last trailing four quarters, delivering an average earnings surprise of 41%.
The stock carries a Zacks Rank #2 (Buy) and has a Growth Score of A at present. The Growth Style Score condenses all the essential metrics from a company’s financial statements to get a true sense of the quality and sustainability of its growth. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 (Strong Buy) or 2 and a Growth Score of A or B offer solid investment opportunities.
With healthy fundamentals, Atlassian appears to be a solid investment option at the moment.
Growth Drivers
The company is benefiting from its venture in cloud, enterprise and IT service management. Its innovative product launches like Compass and Jira Product Discovery over the past two consecutive quarters have further boosted its portfolio. The rise of off-site working trends is driving demand for its offerings, including Confluence and Trello applications that enable organizations to collaborate and manage staff working from different locations.
Atlassian leads in enterprise collaboration and workflow software globally. The company stands to gain from the growing demand for automated communication systems, digitalization of work from organizations and the rapid adoption of cloud services. A report by Mordor Intelligence suggests that the Enterprise Collaboration Market size will reach $100.29 billion by 2029 from $60.33 billion in 2024, witnessing a CAGR of 10.70%.
TEAM is currently focused on selling more subscription-based solutions, boosting steady income and wider profit margins. Its strategy to sell the majority of its products online keeps the company’s sales costs really low, boosting profits. The company saves on sales and marketing expenses while channeling funds toward research and development, raising the profile of its existing solutions and rolling out new ones.
Moreover, Atlassian’s differentiated and easy-to-use products, along with a low and transparent pricing model, help it expand its client base, which has almost doubled in the last four years. The company is also expanding its offering through multiple buyouts, including the acquisitions of Loom in 2023, Percept AI in 2022, and Charito and ThinkTilt in 2022.
TEAM has a strong balance sheet with ample liquidity position and less debt obligations. As of Sep 30, 2023, the company had cash and cash equivalents and short-term investments of $2.24 billion and a long-term debt obligation of $950 million. It generated operating and free cash flows of $167 million and $163.3 million, respectively, during the first quarter of fiscal 2024.
The Zacks Consensus Estimate for Kanzhun's fourth-quarter 2023 earnings per share has been revised downward by 2 cents to 16 cents in the past 30 days. Shares of BZ have declined 38.6% in the past year.
The Zacks Consensus Estimate for Ceridian HCM’s fourth-quarter 2023 earnings has been revised by a penny northward to 32 cents per share in the past 90 days. Shares of CDAY have gained 0.4% in the past year.
The Zacks Consensus Estimate for Everbridge’s fourth-quarter 2023 earnings has declined by a penny in the past 60 days to 49 cents per share. Shares of EVBG have lost 24.1% in the past year.
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Why Atlassian (TEAM) is a Strong Contender for Portfolio Pick
Atlassian (TEAM - Free Report) is a stock that investors should consider adding to their portfolio to benefit from its upside potential.
Tech stocks made a remarkable run in 2023 after a massive sell-off in 2022 on recession concerns, inflationary pressure, increased oil prices and higher interest rates. Atlassian was one of the beneficiaries of last year’s tech rally, which soared 84.8% in 2023, outperforming the Zacks Computer and Technology sector’s rise of 53.8%.
The stock also outpaced the return of major stock market indexes, including the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite, which gained 13.7%, 43.4% and 24.8%, respectively.
Atlassian Corporation PLC Price and Consensus
Atlassian Corporation PLC price-consensus-chart | Atlassian Corporation PLC Quote
The surge reflects investors' confidence in TEAM's strategic positioning, robust financial performance and sustained focus on expanding its product portfolio that caters to customers’ needs amid the ever-changing landscape of workforce and project management.
The company has experienced continuous growth in both revenues and profits over the past several quarters, driven by high demand for its solutions. Atlassian has an impressive earnings surprise history. It outpaced estimates in each of the last trailing four quarters, delivering an average earnings surprise of 41%.
The stock carries a Zacks Rank #2 (Buy) and has a Growth Score of A at present. The Growth Style Score condenses all the essential metrics from a company’s financial statements to get a true sense of the quality and sustainability of its growth. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 (Strong Buy) or 2 and a Growth Score of A or B offer solid investment opportunities.
With healthy fundamentals, Atlassian appears to be a solid investment option at the moment.
Growth Drivers
The company is benefiting from its venture in cloud, enterprise and IT service management. Its innovative product launches like Compass and Jira Product Discovery over the past two consecutive quarters have further boosted its portfolio. The rise of off-site working trends is driving demand for its offerings, including Confluence and Trello applications that enable organizations to collaborate and manage staff working from different locations.
Atlassian leads in enterprise collaboration and workflow software globally. The company stands to gain from the growing demand for automated communication systems, digitalization of work from organizations and the rapid adoption of cloud services. A report by Mordor Intelligence suggests that the Enterprise Collaboration Market size will reach $100.29 billion by 2029 from $60.33 billion in 2024, witnessing a CAGR of 10.70%.
TEAM is currently focused on selling more subscription-based solutions, boosting steady income and wider profit margins. Its strategy to sell the majority of its products online keeps the company’s sales costs really low, boosting profits. The company saves on sales and marketing expenses while channeling funds toward research and development, raising the profile of its existing solutions and rolling out new ones.
Moreover, Atlassian’s differentiated and easy-to-use products, along with a low and transparent pricing model, help it expand its client base, which has almost doubled in the last four years. The company is also expanding its offering through multiple buyouts, including the acquisitions of Loom in 2023, Percept AI in 2022, and Charito and ThinkTilt in 2022.
TEAM has a strong balance sheet with ample liquidity position and less debt obligations. As of Sep 30, 2023, the company had cash and cash equivalents and short-term investments of $2.24 billion and a long-term debt obligation of $950 million. It generated operating and free cash flows of $167 million and $163.3 million, respectively, during the first quarter of fiscal 2024.
Zacks Rank and Other Stocks to Consider
Some other top-ranked stocks from the broader technology sector are Kanzhun (BZ - Free Report) , Ceridian HCM and Everbridge (EVBG - Free Report) , each sporting a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Kanzhun's fourth-quarter 2023 earnings per share has been revised downward by 2 cents to 16 cents in the past 30 days. Shares of BZ have declined 38.6% in the past year.
The Zacks Consensus Estimate for Ceridian HCM’s fourth-quarter 2023 earnings has been revised by a penny northward to 32 cents per share in the past 90 days. Shares of CDAY have gained 0.4% in the past year.
The Zacks Consensus Estimate for Everbridge’s fourth-quarter 2023 earnings has declined by a penny in the past 60 days to 49 cents per share. Shares of EVBG have lost 24.1% in the past year.