Atlassian’s stock dropped but Wall Streeters still see a bright future

Software company Atlassian
Atlassian

Australian team productivity
software company
Atlassian saw its stock drop 14% on Friday after it announced its earnings, falling from
$81.89 on Thursday evening to $70.18 by the end of Friday.
The stock has since rebounded slightly, and was trading at
$72.64 on Monday evening.

Atlassian reported revenue that
beat Wall Street analyst’s expectations by 3%, but the beat left
some investors disappointed.

“While they guided up, they
didn’t guide as much as people had hoped and expected,” Joel
Fishbein, Jr., a software and cloud technology analyst at BTIG,
told Business Insider. “The operating margins are a little bit
less than what Wall Street had expected.”

Here’s what it reported:

• Revenue: $267.3
  million. Analysts polled by Bloomberg were expecting $260
  million.
• Net income per diluted share:
  $0.20. Wall Street forecasted $0.19 a
  share.
• Revenue guidance (next quarter):
  $287 million to $289 million. Analysts are
  predicting $281 million.
• Net income per diluted share guidance (next
  quarter):
  $0.21. Wall
  Street was forecasting $0.20 a share.

The question going forward is
whether Atlassian can penetrate the IT market, analysts say. The
company has strong product demand, according to
Fishbein, and just before the end of the quarter, Atlassian
increased
pricing for its products, meaning there’s a potential upside
to the numbers next quarter.

Atlassian is focused on serving
the IT market. At the start of fiscal 2019, Atlassian announced
its acquisition of IT alerts technology company OpsGenie for
about $295 million and introduced a new incident management
platform called Jira Ops. Atlassian also just
revamped Jira, its oldest and most well-known software
product. The first quarter is off to a strong start so far,
Fishbein says.

This past year, Atlassian

partnered with Slack, and one of Atlassian’s key products,
Trello, saw its user base grow to over 35 million people.
Atlassian also surpassed 100,000 cloud customers.  Morgan
Stanley analysts also believe that Atlassian has strong growth
potential, as there are 100 million technical users around the
world up for grabs.

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