Why Atlassian stock jumped 15.8% today
Actions of Atlassian (NASDAQ: TEAM) has a “bonzer” day (in Australian for “good”) on the market today. Stock prices rose 15.8% before retreating to a more moderate 7.6% gain at 11:45 a.m. EDT. A fantastic first quarter earnings report sparked the Australian-based software company’s big leap.
In the first quarter of fiscal 2022, Atlassian sales increased 34% year-over-year to $ 614 million. As a result, adjusted earnings jumped 53% to $ 0.46 per diluted share. Your average analyst would have been content with a profit of about $ 0.40 per share on earnings of nearly $ 582 million. It was no small surprise on the upside.
For this report, management updated its definition of customers, narrowing the term down to those with an active subscription or maintenance contract. The change primarily excludes single-user Trello accounts. Under this new definition, Atlassian’s customer base grew 5.7% sequentially and 30% year-on-year, reaching 216,500 accounts.
Atlassian’s migration to a pure cloud computing operating model is proceeding as planned, although management noted that there are still several years to go.
Many existing customers are hanging onto their current software license agreements for popular tools like the Trello collaboration platform and the Jira project management system. Atlassian allows these customers to switch to cloud versions of these tools at their own pace. The company sold its last software license two quarters ago, but will provide maintenance and support to latecomers until February 2024.
This lightness makes sense because Atlassian’s customer base is driven by strong positive word-of-mouth marketing. Forcing customers to jump to the cloud before they’re ready could hurt Atlassian’s customer relationships.
The stock has now doubled in 52 weeks, trading at 293 times earnings and 51 times sales. This aggressive growth title is not for the faint of heart, but Atlassian’s robust revenue growth is hard to argue with, even amid the groundbreaking shift in strategy mentioned above. Growth investors don’t mind paying a premium for top-quality companies, and Atlassian falls squarely into that category.
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