Atlassian (NASDAQ:TEAM) was initiated with a Neutral rating and a $225 per share price target by UBS analysts on Monday.
The analysts told investors that the stock's upside is already priced in, with shares the third-best performing software stock at +11% since Microsoft's (NASDAQ:MSFT) June quarter print on July 25th, when the software sector started to weaken.
The provider of the popular Jira Software suite for software development teams valuation looks full "for a company that is very reliant on price increases and migrations to Cloud/premium editions to drive growth," according to the analysts.
"Our checks point to continued friction associated with migrating to Atlassian's Cloud edition, and a lower-than-expected Server-to-Cloud conversion rate in the coming quarters could limit the upside to Atlassian's Cloud revs growth in FY24," they wrote. "Very few customers are looking to displace Jira and Confluence products, but these are very mature products with limited seat growth."
"However, significant stickiness drives continued pricing power, which Atlassian continues to use as a lever for top-line growth," they added.
Furthermore, they stated the firm "did not pick up convincing evidence" that Atlassian's push into the ITSM and work management markets is poised for material success.