Project management and collaboration software provider Atlassian Corporation PLC TEAM reported forecast-beating first-quarter results Thursday and issued above-consensus second-quarter guidance.
The company also announced the acquisition of Code Barrel, an automation tool maker for Jira, its issue-tracking product.
The Analysts
KeyBanc Capital Markets analyst Alex Kurtz maintained an Overweight rating on Atlassian with a $150 price target.
Mizuho Securities analyst Gregg Moskowitz reiterated a Buy rating and $152 price target.
Morgan Stanley analyst Keith Weiss maintained an Equal-weight rating and $145 price target.
KeyBanc: Core Thesis Unchanged, But Higher Opex to Weigh On Shares
Atlassian delivered overall solid operating metrics, with 7,060 organic new customers, 50% year-over-year subscription growth and an operating margin beat, Kurtz said in a Thursday note.
The October price increase likely contributed to strong first-quarter billings performance, the analyst said.
Kurtz expects the recently introduced new Free Editions cloud tier to bring in new customers.
"How this cohort of customers are converted in revenue later in [fiscal years 2020 and 2021] will be a key trend to monitor."
KeyBanc raised its estimates for fiscal years 2020 and 2021 slightly, with some mix shift toward subscription revenue due to strong sub performance.
The analyst also increased the fiscal year 2020 EPS estimate by 2 cents to $1.03, but lowered the 2021 estimate by 2 cents to $1.31, primarily due to a higher share count.
"Our core TEAM thesis of global adoption of collaboration platforms remains unchanged, but slightly higher implied opex could weigh on shares near term," Kurtz said.
See also: Morgan Stanley Sifts Through Software Sector, Flags 'Picks,' 'Holds'
Mizuho: Growth To Remain Strong
Notwithstanding the positive across-the-board results and guidance, near-term appreciation in Atlassian shares is unlikely given the high expectations going into the print, Moskowitz said in a Friday note.
The analyst said he expects to see a more subdued amount of pull forward in the second quarter versus a year ago, when the cutoff date for price changes was Oct. 12.
"Further, we reiterate that TEAM's recent lean-in to cloud will have material and far-reaching positive implications for the business."
Moskowitz said he expects to see even stronger new customer acquisition rates, better cross-selling activity and higher unit economics.
Mizuho remains confident that growth will be strong for the foreseeable future due to Atlassian's unique go-to-market approach that is "almost impossible to replicate," and as it continues to broaden its pipeline and enjoy significant pricing power in the marketplace.
Morgan Stanley: Consistent Growth Makes Atlassian A Marquee Software Asset
Atlassian's 37% billings growth in the first quarter was powered by an expanding customer base, solution portfolio and pricing power, Weiss said in a Friday note.
The analyst lauded Atlassian for its year-after-year consistency in growth, which he said makes it a marquee asset in software.
Atlassian remains poised to continue its 30% annual growth in free cash flow for a sustained period of time, Weiss said.
Morgan Stanley said it believes the durability is reflected in shares and therefore remains sidelined and awaiting a better entry point.
The Price Action
Atlassian shares were down 6.76% at $114.35 at the time of publication.
Related Link: KeyBanc Hikes Atlassian Price Target, Sees Potential For Sustained 30% Subscription Revenue Growth
Photo courtesy of Atlassian.
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