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On Monday, Piper Sandler increased the price target for Atlassian (NASDAQ:TEAM) Corporation (NASDAQ:TEAM) stock to $310 from the previous $265, while retaining an Overweight rating. The adjustment follows a period of strong performance from the company, with shares climbing approximately 80% since the fourth fiscal quarter results.
"Coming off a strong F1Q and meeting with management on our recent bus tour we think TEAM has one of the most compelling 2025 setups in our coverage," analysts at the firm said.
The analyst believes that Atlassian's stock has not fully incorporated the expected multi-year acceleration suggested by the company's mid-term target of over 20% compound annual growth rate (CAGR), as well as the implied margin improvement.
Atlassian's stock is currently trading at a discount compared to its peers despite the positive outlook. The analyst pointed out that many investors are still assessing the feasibility of the 20%+ top-line CAGR projected for fiscal years 2024 to 2027, as presented during the last year's investor day.
Piper Sandler acknowledges the challenges in gaining confidence in a multi-year growth reacceleration given the current expenditure climate. However, the firm is optimistic that the anticipated growth is achievable as Atlassian moves past the difficult comparisons following the end of life for its Server product and focuses on increasing seat expansion and upsell dynamics by fiscal year 2027.
The firm's base case growth assumptions for Atlassian to achieve a 20% CAGR include a forecasted slowdown in cloud and data center growth rates in fiscal year 2026. Nevertheless, total revenue growth is expected to accelerate by approximately 400 basis points as the company overcomes the tough server comparisons.
The recent first fiscal quarter results, which reflect the company's more conservative guidance philosophy, have bolstered Piper Sandler's confidence in Atlassian's capacity to sustain outperformance in the upcoming year and beyond, leading to the increased price target.
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