KeyBanc Hikes Atlassian Price Target, Sees Potential For Sustained 30% Subscription Revenue Growth

Atlassian Corporation PLC TEAM has several ways to sustain a subscription revenue growth rate north of 30% in the years ahead, according to KeyBanc Capital Markets.

The Analyst

Alex Kurtz maintained an Overweight rating on Atlassian and raised the price target from $121 to $142.

The Thesis

Despite Atlassian’s stock trading at a premium to traditional SaaS companies, investors are focusing on the company’s longer-term prospects in light of its solid free cash flow generation and strong growth profile, Kurtz said in a Wednesday note. (See his track record here.)

Atlassian’s core collaboration solutions, Jira Core and Confluence, will be increasingly deployed across customers, while Jira Service Desk will drive incremental seats and adoption, the analyst said. Together, these solutions will expand the ARPU opportunity, he said. 

Publicly disclosed RFPs suggest the trailing-12-month average billings per deal have risen more than 50% year-on-year, indicating growth in renewal size and benefits from recent price hikes, Kurtz said. 

KeyBanc raised revenue its 2020 and 2021 revenue estimates from $1.55 billion to $1.56 billion and from $1.95 billion to $1.97 billion, respectively.

Given the ARPU growth opportunity, KeyBanc said it raised EPS estimates for 2020 and 2021 from 97 cents to $1 and from $1.29 to $1.32, respectively.

Price Action

Atlassian shares were up 1.24% at $130.57 at the time of publication Thursday. 

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Photo courtesy of Atlassian.