BTIG Research Downgraded Atlassian To Neutral On Valuation

BTIG Research downgraded Atlassian Corporation PLC TEAM to Neutral on valuation.

Shares rose more than 60 percent in the past six months alone, as the buy-side gets increasingly comfortable with Atlassian's "flywheel" model.

The stock currently trades at 10.7x EV/FY17 Revenues, versus the rest of BTIG's application software coverage at 8.4x.

"A quick "stress test" of the model still yields a multiple well above peer levels; even assuming Atlassian can replicate FY16 revenue growth of +43% y/y, the stock would still trade at ~10x," analyst Joel Fishbein wrote in a note.

Further, the company's financial results proved its business model can drive strong revenue growth while still maintaining an impressive margin profile. The company delivered 40 percent plus revenue growth for the third straight year, while FY16 margins grew 150 basis points to about 17 percent.

In this backdrop, Fishbein said the company's FY17 revenue guidance of 30 percent plus growth looks conservative. BTIG expects the business model can drive revenue growth of ≥30 percent over the next few years, ahead of current Street estimates and guidance.

"With the market appropriately anticipating a continuation of the "beat and raise" trend, we'd look for a pull-back in shares as the next potential buying opportunity," Fishbein added.

Shares of Atlassian closed Tuesday at $30.66.