Atlassian Crashes on Weak FY Forecast, Piper Sandler Downgrade By


© Reuters. Atlassian (TEAM) Crashes on Weak FY Forecast, Piper Sandler Downgrade

By Senad Karaahmetovic

Atlassian (NASDAQ:) saw its shares plunge by more than 25% after the company offered a disappointing outlook for its second fiscal quarter.

For its first fiscal quarter, Atlassian an EPS of $0.36, missing the consensus of $0.40. Revenue came in somewhere in line with estimates, $807 million relative to the expected $806.3 million. While revenue increased 31% year-over-year, the company reported an increase in the total number of customers by 15% YoY. Compared to a year-ago period, Atlassian added fewer new customers by 44%.

The company expects Q2 revenue to be $845 million (the midpoint), which implies an increase of nearly 5% quarter-over-quarter. Analysts were looking for 9% growth.

Piper Sandler analysts cut the price target by almost 50% to $148 per share and downgraded TEAM to Neutral from Overweight.

“Atlassian is choosing to invest behind the business still, which is taking margins and cash flow estimates lower again. While this is good for the long-term of the benefit, near-to-medium-term, it presents challenges for investors. With an uncertainty as to when these headwinds will abate given the macro challenges, lack of profitability stability near-term, and valuation still at a premium to most of tech, we are downgrading to Neutral as we await the turn-around,” the analysts said in a client note.

Goldman Sachs analysts cut the price objective to $265 from $300 but remain positive on the company’s business.

“Though investing against this opportunity, we are pleased with management’s continued commitment to mid-teens operating margin in FY23, even with ongoing top-line uncertainty. We reiterate our Buy rating,” the analysts wrote to clients.

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