Investing.com — Raymond James upgraded Atlassian (NASDAQ:) from Market Perform to Outperform on Monday, citing potential upside amid the company’s ongoing cloud transition.
Despite the significant decline in Atlassian’s share price – down nearly 20% in the past six months and 60% in the past three years – Raymond James sees opportunity ahead.
The analysts noted that Atlassian’s cloud growth was a key concern for investors.
The company was originally expected to grow 50% in FY23 and FY24, but the company missed these targets. It reported only 38% cloud growth in FY23 and expected 29% growth in FY24.
The downward revision of expectations disappointed investors, causing the stock to underperform. However, Raymond James now believes that cloud growth in FY25 could exceed expectations.
For FY25, Atlassian’s cloud growth guidance is 23%, but Raymond James sees potential for growth in the mid to high 20% range due to factors such as 120% net revenue retention (NRR) , price increases and migration winds from data centers.
The analysts also pointed to a stabilization in developer seats – a crucial metric for Atlassian – which, while declining, remained flat in the most recent quarter. This, combined with the expected improvements in Atlassian’s go-to-market organization, provides a favorable foundation for growth.
The “risk/reward scenarios are favorable,” said Raymond James, who maintained his FY25 revenue and earnings estimates of $5.06 billion and $3.09, respectively, and raised his price target to $200 based on a multiple of 8. 5x EV/Sales versus fiscal year 26 revenue estimates. .
The analysts see a path for Atlassian to achieve cloud growth of more than 30% in the coming years, which could boost its stock price. At best, they see potential for a price of $300, while in a bear case the price could fall to $125. The company’s price target for the stock is $200 per share.
