Atlassian TEAM shares hit a new 52-week high of $262 on Friday, before closing a tad lower at $260.58. The stock has made a remarkable run over the past year with shares soaring 44.5%. Also, it has outperformed the Zacks Computer and Technology sector and the S&P 500’s return of 32.9% and 31.2%, respectively.
This significant outperformance reflects investors’ confidence in Atlassian’s position as the global leader and innovator in the enterprise collaboration and workflow software space and its double-digit growth in the top line. With the share price already reaching near 52-high, the question remains — Is TEAM stock worth buying?
New Product Launches Aid Atlassian
Atlassian has been expanding its portfolio with the recent addition of solutions including Atlassian Intelligence, Rovo, Focus, Guard Premium, Compass Premium and Jira Product Discovery Premium. Atlassian Intelligence uses AI to offer data insights, work acceleration, content generation and context-specific assistance for improved team collaboration.
Atlassian’s Rovo uses its teamwork graph to deliver differentiated value by unlocking organizational knowledge at scale. Atlassian Focus is an enterprise strategy and planning solution. The newly introduced Compass Premium and Jira Product Discovery Premium are the enhanced versions of Atlassian Compass and Jira Product Discovery. The persistent product innovation is building long-term prospects for Atlassian’s cloud platform.
Furthermore, the company is benefiting from the ongoing digitalization of work from organizations and the rapid adoption of cloud services. According to a Mordor Intelligence report, the global enterprise collaboration market is likely to reach approximately $90.6 billion by 2028 from $54.5 billion in 2023, witnessing a CAGR of 10.7%.
Atlassian is currently focused on selling more subscription-based solutions. This unique business model is helping the company in generating stable revenues while expanding margins. Subscription-based service is a high-margin business as the incremental cost to add a user declines as the company’s user base increases. Subscriptions have been the company’s fastest-growing segment, which has witnessed a CAGR of more than 43% between fiscal 2020 and fiscal 2024.
These factors are expected to contribute to Atlassian’s continued top-line growth. The Zacks Consensus Estimate for TEAM’s fiscal 2025 revenues is pegged at $5.08 billion, indicating year-over-year growth of 16.64%. The Zacks Consensus Estimate for TEAM’s fiscal 2025 earnings is pegged at $3.18, suggesting year-over-year growth of 8.5%.
Atlassian 1 Year Performance
Image Source: Zacks Investment Research
Near-Term Risks Persist for Atlassian
Atlassian’s near-term prospects might be hurt by softening IT spending. Enterprises are postponing their large IT spending plans due to a weakening global economy amid ongoing macroeconomic and geopolitical issues. This does not bode well for Atlassian’s prospects in the near term.
Although TEAM has long been a strong contender in the collaboration and workflow software space, the market has continuously been crowded by industry leaders like Broadcom AVGO, Microsoft MSFT, Alphabet GOOGL, Salesforce and IBM.
Atlassian’s JIRA software matches solutions like Broadcom’s Rally Software, Microsoft’s Azure DevOps Server and IBM’s Rational. TEAM’s Confluence product competes with Salesforce Chatter and Alphabet’s Google Apps for Work.
Intensifying competition could force Atlassian to resort to competitive pricing and other methods to safeguard its market share. In fact, TEAM’s research and development (R&D) costs are continuously rising, driven by increased investment in artificial intelligence to enhance its product capabilities.
In the last reported financial results for first-quarter fiscal 2025, its non-GAAP R&D expenses soared 33.9% year over year and revenues grew 21.5% year over year. Increased R&D expenses negatively impacted profitability, with non-GAAP operating margin contracting 40 basis points.
What Investors Should Do With TEAM Stock
Atlassian’s aggressive bid to increase its product portfolio has helped it launch a number of solutions this year, but, it has also increased the company’s research and development expenses. Massive investments in R&D to boost product offerings and capabilities might dampen its margins.
Moreover, TEAM’s near-term prospects might be hurt by softening IT spending amid ongoing macroeconomic uncertainties. Atlassian also has a Zacks Value Style Score of F, which indicates that the stock is highly overvalued at present.
Considering all these factors, we suggest investors to retain this Zacks Rank #3 (Hold) stock at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks' Research Chief Names "Stock Most Likely to Double"
Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.
This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
Free: See Our Top Stock And 4 Runners UpMicrosoft Corporation (MSFT) : Free Stock Analysis Report
Broadcom Inc. (AVGO) : Free Stock Analysis Report
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
Atlassian Corporation PLC (TEAM) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
