Atlassian (TEAM) Stock Drops on Soft Outlook, Analyst Says After-Hours Selloff 'Unjustified'

Shares of Atlassian Corporation (NASDAQ: TEAM) are down more than 6% in pre-open Friday after the company shared a weaker-than-expected outlook amid higher investments.

TEAM reported non-IFRS EPS of 47c, compared to 48c in the year-ago quarter and above analyst expectations of 32c per share. Revenue came in at $740.5 million, up 30% YoY, beating the consensus estimates of $701.3 million.

Subscription revenue stood at $555.1 million in the period, up 59% YoY and above the expected $529.3 million. Atlassian reported 234,575 customers in the period, up 10% YoY and short of the expected 247,384. Non-IFRS operating margin was reported at 24%, while analysts were expecting 17.2%.

For Q4, Atlassian expects non-IFRS EPS of around 24c, missing the analyst consensus of 30c. The company expects revenue in the range of $710 million to $725 million, topping the expectations of $689.4 million. Non-IFRS operating margin is expected to be around 15%, compared to the consensus of 15.6%.

“We now have line of sight to $10 billion in annual revenue based on our current markets and products,” said co-founder and co-CEO Mike Cannon-Brookes.

The company also said it appointed a new Chief Technology Officer, Rajeev Rajan.

Morgan Stanley analyst Keith Weiss lowered the price target to $460.00 per share from $505.00 but remains Overweight on strong business fundamentals.

“For investors with a longer-term time horizon, highly attractive cloud transition, solid unit economics, strong market positioning and pragmatic investments for growth will continue to make Atlassian one of the most durable 30% growth stories in software, setting the stage for durable 25%+ FCF growth thru CY26 at a $2.8+ billion scale – an attractive combination with shares trading at ~35x our post-transition CY25 FCF,” Weiss said in a note.

Mizuho analyst Gregg Moskowitz said TEAM delivered a “strong all-around quarter.”

“We are surprised by the 6% AH sell-off, and find it unjustified. Looking forward, we remain confident in our belief that TEAM will benefit from its strategic actions that should drive much better cloud adoption and overall monetization in FY22 and beyond. We reiterate our Buy rating and $500 PT,” the analyst wrote.

By Senad Karaahmetovic

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