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Oppenheimer has maintained a bullish stance on Atlassian (NASDAQ:TEAM) Corporation (NASDAQ: TEAM), reiterating an Outperform rating alongside a $230.00 price target.
The firm's analysis focused on whether Atlassian could achieve a 20% revenue growth rate. According to the assessment, for Atlassian to return to 20%+ growth, several factors must contribute, including a compound annual growth rate (CAGR) of 28.3% in its Cloud business.
The growth in the Cloud segment is expected to come from a combination of seat expansion, which could contribute 9-10 percentage points, migrations from Data Center (DC) adding another 5-9 points, 3-4 points from pricing adjustments, and 7-9 points from cross-selling and introduction of new products.
The report emphasizes that seat growth, particularly among non-technical users, and the successful cross-selling in Enterprise sales are critical variables that could influence the company's growth trajectory.
Oppenheimer's commentary highlights the high execution bar set for Atlassian's management to reach the anticipated growth levels. While the firm sees the management's expectations as achievable, it underscores that attaining these goals is far from a simple endeavor. The analysis points to the need for strong performance across multiple areas of Atlassian's business operations.
In other recent news, Atlassian Corporation reported robust financial results for the fourth quarter of fiscal year 2024, with revenues reaching $4.4 billion and free cash flow exceeding $1.4 billion.
The company also announced price adjustments to its cloud-based products, including Jira Software, Confluence, and Jira Service Management, which are anticipated to contribute positively to the company's financial performance from 2026 onwards.
Mizuho Securities maintained its Outperform rating on Atlassian, citing the company's pricing power and expected significant migrations from Data Center to Cloud platforms in the coming years. In addition to these developments, Atlassian's acquisition of Loom is expected to bolster cloud revenue growth in FY25, while its cloud security capabilities are reportedly attracting government and defense customers.
InvestingPro Insights
As Atlassian Corporation (NASDAQ:TEAM) continues to navigate its growth strategy, recent data from InvestingPro provides a nuanced view of the company's financial health and market performance. Atlassian's impressive gross profit margin stands at 81.57% for the last twelve months as of Q4 2024, underlining the company's ability to maintain profitability in its core operations. This aligns with Oppenheimer's bullish stance, as high margins are often indicative of a company's potential to leverage its products and services effectively.
Furthermore, with a market capitalization of $42.41 billion and a significant revenue increase of 23.31% over the same period, Atlassian demonstrates a robust capacity for growth. Despite not being profitable over the previous twelve months, analysts predict the company will turn a profit this year. This anticipated shift towards profitability could serve as a catalyst for achieving the 20% revenue growth rate Oppenheimer considers within reach, especially when coupled with the strategic focus on expanding the Cloud business and cross-selling opportunities.
InvestingPro Tips also reveal that Atlassian is trading at a high revenue valuation multiple and a high Price / Book multiple of 41.06, which may suggest the stock is priced optimistically based on its book value and revenue. While this could raise questions about valuation, the company's potential profitability and strong gross margins may justify investor confidence. For those interested in a deeper dive into Atlassian's financials and market position, InvestingPro offers additional tips to help investors make informed decisions InvestingPro.
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