On Friday, Canaccord Genuity adjusted its price target for Atlassian (NASDAQ:TEAM) Corporation (NASDAQ:TEAM) stock, a leading provider of team collaboration and productivity software, to $230 from the previous $260. Despite the price target reduction, the firm maintained a Buy rating on the company's shares.
The revision in the price target comes in the wake of Atlassian's updated financial outlook for fiscal year 2024. The company has increased its Cloud revenue growth forecast to 30%, which is a 0.5 percentage point rise at the midpoint.
This growth includes an approximate 1.5% contribution from the company's acquisition of Loom. Additionally, Atlassian has raised its Data Center revenue growth expectations to around 48%, a significant jump from the previously anticipated 36%.
In terms of profitability, Atlassian has improved its gross margin forecast slightly by about 0.5 percentage points, bringing it to 84% for FY24. However, the shift in revenue mix towards Cloud services is expected to keep the gross margins in check.
Moreover, the non-GAAP operating margins for FY24 are projected to be around 23%, marking an increase of approximately 200 to 250 basis points. This forecast includes some dilution effects from Loom.
Atlassian also announced that it will cease the recognition of Server revenue, which will drop to $0 starting in the fourth fiscal quarter. Furthermore, the company anticipates that Data Center growth will begin to slow down through fiscal year 2025. This deceleration is attributed to the completion of server migrations and the changing dynamics as customers transition from Data Center to Cloud services.
InvestingPro Insights
Following Canaccord Genuity's price target adjustment for Atlassian Corporation (NASDAQ:TEAM), a closer look at InvestingPro data and tips reveals additional insights into the company's financial health and market performance. Atlassian's market capitalization stands at a robust $51.47 billion, reflecting significant investor confidence. The company's impressive gross profit margin of 81.97% for the last twelve months as of Q2 2024 aligns with the upward revision in its gross margin forecast for FY24. Despite not being profitable over the last twelve months, analysts predict that Atlassian will turn a profit this year, which could be a pivotal moment for the company's financial trajectory.
InvestingPro Tips highlight that Atlassian operates with a moderate level of debt, which could provide financial flexibility as it continues to grow. However, it's worth noting that the company is trading at high revenue and Price / Book valuation multiples, indicating that its stock price may be on the higher side relative to its book value and revenue. For investors looking to make an informed decision, there are additional InvestingPro Tips available, which could further clarify Atlassian's position in the competitive software market.
To explore these insights in more depth and access a comprehensive list of InvestingPro Tips, investors can visit https://www.investing.com/pro/TEAM. And to enhance their InvestingPro experience, users can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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