Morgan Stanley Joins Bull Thesis TEAM On Atlassian Corporation

Analysts Sanjit Singh and Keith Weiss believe the improving user base expansion and clear signs of pricing power support about 30-percent revenue growth and 40-percent free cash flow growth trajectory over the next four years. These, according to the analysts, have served to reduce the uncertainty over the company's ability to expand its user base beyond product engineering teams.

Morgan Stanley clarified that the upgrade reflected a larger opportunity ahead following its conversation with partners, which pointed to improving expansion within the base into the broader IT department and into business team.

Additionally, the firm noted strong adoption of products of Jira Software, including Jira Core, Jira Service Desk and Confluence. The firm quoted IDC's estimate that market opportunity for tools, including Jira Software, BitBucket and Confluence, is $25 billion.

"However, checks that point to traction outside of software teams, with products such as Jira Service Desk, Jira Core, Confluence, and Trello, opens the company up to the ~$2.5 billion IT service management, the $4 billion Project & Portfolio Management market, the ~$6 billion customer service management market, and the ~$15 billion collaborative applications market, resulting in a total opportunity of ~$30 billion in 2016 category spend according to IDC," the firm clarified.

The firm also sees consistent top-line and impressive margin/cash flow outperformance.

As such, Morgan Stanley upgraded shares of Atlassian from Equal-Weight to Overweight and increased its price target from $35 to $45.

At the time of writing, shares of Atlassian were up 4.39 percent at $38.01.