Atlassian (TEAM) Buys Loom to Boost Collaboration Tool Abilities
Atlassian Corporation TEAM announced on Thursday that it has agreed to buy the video-messaging startup and one-time unicorn, Loom, for $975 million, its largest-ever deal. Per the deal terms, Atlassian will pay $880 million in cash and the remaining in equity awards. The company intends to fund the transaction through its existing cash balance. It ended fiscal 2023 with cash and cash equivalents and short-term investments of $2.11 billion.
The transaction is anticipated to close during Atlassian’s third quarter of fiscal 2024. Moreover, the company forecasts that the acquisition will be slightly dilutive to non-GAAP operating margins in fiscal 2024 and 2025.
Shares of Atlassian have outperformed the Zacks Computer and Technology sector in the year-to-date (YTD) period. While TEAM stock has rallied 44.8% YTD, the Computer and Technology sector has risen 38.9%.
Atlassian Corporation PLC Price and Consensus
Atlassian Corporation PLC price-consensus-chart | Atlassian Corporation PLC Quote
Loom to Boost TEAM’s Collaboration Tool Capabilities
Founded in 2016, US-based Loom is a pioneer in enterprise video chat and screen recording. The company’s AI-enabled software lets users simultaneously record their computer screens, cameras and microphones and share them with colleagues. Loom tools are used by companies to implement asynchronous (async) videos that facilitate an alternative real-time conference, which means users can reply to their co-worker’s messages in their own time.
Loom’s video messaging platform has more than 25 million users and was named among the top 50 of Fast Company’s World’s Most Innovative companies in 2023. Additionally, the company’s business users are recording approximately five million async videos per month.
Therefore, the Loom acquisition is anticipated to boost Atlassian’s team collaboration capabilities and help tap opportunities from the growing hybrid working trend-led demand. The productivity software giant intends to continue Loom as a standalone product as well as integrate it into its other collaboration tools, including Jira and Confluence.
The acquisition of Loom could also give a boost to Atlassian’s decelerating customer growth rate. The reopening of offices post the pandemic has reduced the demand for the company’s collaboration tools. The year-over-year growth rate of net new customer additions has decelerated in the last seven quarters. During the last reported financial results for the fourth quarter of fiscal 2023, the company added 2,562 net new customers, which was the lowest in the past 12 quarters.
We believe that the Loom-enabled enhanced features across its team collaboration tools will help Atlassian attract new customers as well as boost revenues through cross-selling. Currently, Atlassian has more than 260,000 customers, while Loom serves more than 200,000 clients.
Zacks Rank & Other Stocks to Consider
Currently, Atlassian carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks from the broader technology sector are NVIDIA NVDA, Palo Alto Networks PANW and Paylocity Holding PCTY. NVIDIA and Palo Alto each sport a Zacks Rank #1 (Strong Buy), while Paylocity carries a Zacks Rank #2 at present. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for NVIDIA's third-quarter fiscal 2024 earnings has been revised upward by 2 cents to $3.34 per share in the past 30 days. For fiscal 2024, earnings estimates have increased by 7 cents to $10.74 per share in the past 30 days.
NVIDIA’s earnings beat the Zacks Consensus Estimate thrice in the preceding four quarters while missing on one occasion, the average surprise being 9.8%. Shares of NVDA have surged 220.8% YTD.
The Zacks Consensus Estimate for Palo Alto Networks' first-quarter fiscal 2024 earnings has been revised upward by 6 cents to $1.16 per share in the past 60 days. For fiscal 2024, earnings estimates have increased by 39 cents to $5.34 per share in the past 60 days.
Palo Alto Networks’ earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 22.2%. Shares of PANW have surged 86.8% YTD.
The Zacks Consensus Estimate for Paylocity’s first-quarter fiscal 2024 earnings has remained unchanged at $1.07 per share in the past 60 days. For fiscal 2024, earnings estimates have moved 5 cents upward to $5.58 per share in the past 60 days.
Paylocity’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 39.7%. Shares of PCTY have risen 1.4% YTD.
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