Analyst: If You Didn't See A Solid Quarter From Atlassian Coming, You Haven't Been Paying Attention

Although the firm views the stock to be expensive in the short term, it sees the long-term value as compelling.

As such, the firm maintains its Buy rating on the shares of the company and increased its price target from $44 to $52.

At time of writing, Atlassian shares were up 23.58 percent to $49.74.

Analysts Richard Davis, David Hynes and Mark Belcarz said the quarter was a generally good quarter, characterized by a modest beat and raise all, accompanied by bullish commentary from the management.

The company ended the quarter with 107,746 customers, with more than 75 percent of new customers choosing one or more cloud products, the analyst added. The analysts noted that the management commentary suggested strong across-the-board demand, with particular strength in data center and server products.

Consequently, the analysts pointed out that deferred revenue (up 47 percent year over year) saw the highest growth since the company went public.

The firm said it did not see much flaws from an execution standpoint, but said the valuation isn't cheap and the gross margin is likely to decline gradually, as the company transitions from Server to Cloud over time.

The analysts indicated that they have always been bullish on Atlassian, given the business model of the company calls for self-education by buying, relieving it from spending too much on sales and marketing.

Therefore, the analysts believe the company can spend disproportionately on R&D, creating a flywheel of innovation faster than most of the competition.

Canaccord Genuity sees the post-earnings stock gains to be consolidated only for a few weeks or so, given the 65 percent run-up in the stock in the year-to-date period.

"But even so, a 22x EV/FCF multiple on 2022 estimates gives us a stock price of about $80 sometime in 2021, which translates into a 19% IRR from recent prices," the firm said.