Atlassian (TEAM) tumbles on weak forecast, prompts Goldman to downgrade stock

Atlassian (NASDAQ: TEAM) shares are down 13.5% in early Friday trading after the software company issued a disappointing revenue forecast for its fiscal fourth quarter.

Atlassian said its revenue rose 24% year-over-year to $915.5 million as Subscription revenue jumped 37% to $760.7M. Analysts were looking for $938.75M and $746.6M, respectively.

Q3 EPS came in at $0.54, beating the $0.42 expected. The total number of customers rose 11% YoY to nearly 260,000.

“With more than 20 years of knowledge reflecting how hundreds of thousands of software, IT, and business teams plan, track, and deliver work, Atlassian Intelligence has a unique understanding of teamwork. We are beyond thrilled about AI’s ability to unleash our customers’ potential and strengthen our competitive advantage,” said Mike Cannon-Brookes, Atlassian’s co-founder and co-CEO.

For this quarter, the company sees revenue between $900M and $920M, missing the $920.5M consensus. The cloud revenue growth is expected to be in the range of 26-28%.

Goldman Sachs analyst Kash Rangan cut his recommendation on TEAM stock to Neutral from Buy as he believes the company's cloud transition is likely taking longer than expected.

“While we await a more stable demand environment and look for an inflection in the company's multi-year investment cycle, we remain constructive on Atlassian's longer-term growth narrative that is likely to be underpinned by the increased integration of generative AI tools. With the stock +16% YTD (vs our coverage avg of +3%) and garnering a ~7x EV/CY24 sales multiple (vs a range of comparable peers’ 4-8x), we see the current valuation screening balanced between the aforementioned factors,” Rangan said.

Mizuho analyst Gregg Moskowitz cut the price target by $20 per share to $215 but remains positive on the TEAM stock.

“Despite the choppy results and guide, TEAM remains one of our top picks for 2023, and we also believe it will likely be one of the biggest winners once the macro environment improves,” the analyst said.

By Senad Karaahmetovic

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