Atlassian Stock Forecast: A SaaS Freight Train

Atlassian Stock Forecast: Business is going global, and in-person meetings are no longer the standard method of collaborating and exchanging information.

Instead of dropping huge sums on travel, most companies are investing in collaboration technology. With video conferencing and advanced project management tools, it is now possible to complete massive jobs from anywhere, at anytime, whether or not participants are together.

Atlassian has developed a superior business collaboration platform that is gaining popularity with companies of every size. For investors, the question is whether Atlassian can sustain its growth strategy and continue to return substantial rewards for shareholders.

Atlassian Makes Virtual Work Possible 

Atlassian’s platform is a valuable addition to virtual teams in any company, but it is specifically designed to meet the unique challenges of software and IT projects.

Relying on a  Software as a Service (SaaS) business model makes the platform easy to implement, maintain, and upgrade, and Atlassian has the benefit of recurring revenue.

The company markets five distinct services, all of which are critical to the success of project teams:

  • Jira – teams  utilize this service to plan and monitor projects
  • Jira Service Desk – an intuitive self-service portal that connects customers and team members for fast, effective issue resolution
  • Confluence – teams create and share data and documents through this service
  • Trello – transforms tasks into visual representations, so users can see – at a glance – who has been assigned specific activities and where they are in terms of task completion
  • Bitbucket – specifically designed to simplify collaboration on coding activities

Most users report that after growing accustomed to the Atlassian platform, they find their efficiency and effectiveness growing dramatically.

This bodes well for the company’s future revenues, as based on these reports, renewals are inevitable. After all, the cost of acclimating to a new tool is high when considering lost productivity during the roll-out – not to mention the expense of moving data from one platform to another.

Better still, prospective clients in search of a solid project management solution are likely to choose Atlassian as users move to other roles in new organizations and share their feedback along the way.

Atlassian by the Numbers

Atlassian [NASDAQ: TEAM] is growing – quickly – and there is no end in sight for its upward trajectory.

At the end of the company’s fiscal 2016, it had approximately 61,000 clients. Revenues came in at $457 million, gross profits were $381 million, and Atlassian reported free cash flow of $96 million.

Fast forward just 30 months, and those figures have jumped up considerably. The number of clients topped 138,000, and revenues, gross profits, and free cash flow soared.

Halfway through the 2019 fiscal year, revenues were reported at $977 million, gross profits at $846 million, and free cash flow at $347 million. That translates to a compounded growth rate of 36 percent per year for revenue and 67 percent per year for free cash flow.

The availability of cash is critical to research and development, and it gives Atlassian the flexibility to explore acquisition options. If another company does develop complementary technology, Atlassian is in a solid position to acquire it.

Finally, Atlassian’s large and diverse client list reduces the chances of sudden revenue drops if a few major customers leave for a competing product. No single client makes up more than 10 percent of total sales, reducing Atlassian’s dependance on individual organizations.

How Atlassian Eclipses the Competition 

Atlassian [NASDAQ: TEAM] is committed to continued growth, and its strategy includes careful expansion of its product line.

It has a variety of new services and features in the works, and the following six are already transforming the user experience for some clients:

  • Bamboo – automates improvements in code and supports their release
  • Crowd – promotes more accurate and effective identity management
  • Crucible – identifies programming bugs to support continuous improvement
  • FishEye – searches, monitors, and tracks code performance to support continuous improvement
  • Opsgenie – offers real-time alerts for network incidents that require action
  • Statuspage – identifies and alerts users of network downtime

Because Atlassian’s current product lineup has met with such success, the company has the cash necessary for focused research and development.

This puts Atlassian ahead of the competition, because of the high price tag associated with research and development. Startups just can’t keep up. This becomes even more apparent when considering the impact of Atlassian’s Marketplace.

Through the Marketplace, Atlassian invites third-party app developers to design tools on Atlassian’s platform. This has generated $200 million in sales for Atlassian [NASDAQ: TEAM] during the first half of 2019, and it is marketing genius.

Prospective clients can only use the Marketplace tools when they subscribe to Atlassian’s platforms, increasing the likelihood that they will select Atlassian over competing products, then stick with the service long-term.

Atlassian Stock Forecast: Is It A Buy?

While the numbers tell a compelling story, the people behind this company are even more impressive.

Co-founders Michael Cannon-Brookes and Scott Farquhar are still Atlassian’s leaders, and combined, they own more than 130 million shares. That means they have a strong incentive to ensure Atlassian’s long-term success.

Employees appear to think highly of both leaders, giving them an approval rating of 92 percent. More importantly, four out of five employees  indicate they would refer a friend in search of a new job to Atlassian.

The bottom line is that Atlassian [NASDAQ: TEAM] has all the hallmarks of a company that will achieve long-term success, which is great news for shareholders. That makes Atlassian stock a buy.

The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.