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Atlassian (TEAM) Q3 Earnings: What's in Store for the Stock?

Zacks Equity Research

Atlassian Corporation Plc TEAM is scheduled to report third-quarter fiscal 2019 results on Apr 17.

Notably, the company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 14.41%.

In the last reported quarter, the company’s earnings and revenues beat the Zacks Consensus Estimate as well as the guided range. Also, the top and the bottom line recorded a year-over-year improvement.

For the fiscal third quarter, Atlassian anticipates revenues of $303-$305 million. The Zacks Consensus Estimate is pegged at $304.1 million, up 35.9% from the year-ago quarterly figure.

On a non-IFRS basis (International Financial Reporting Standards), the company expects earnings per share to be 18 cents, indicating a year-over-year surge of 80%.

Let’s see, how things are shaping up prior to this announcement.

Factors to Consider

Atlassian is benefiting from solid customer wins on the back of a diverse product portfolio. The company’s strong pricing power is a tailwind.

Healthy demand for core products like Jira and Confluence coupled with the growing adoption of new products like Jira Service Desk, Trello, Bitbucket, Jira Ops and OpsGenie is a key driver. Pricing increase along with enhanced product cross-sell is likely to sustain the uptick in core products.

On the last earnings call, management announced that JIRA Software crossed 65,000 customers. Including OpsGenie, the company ended the fiscal second quarter with a total customer count of more than 138,000.

Higher uptake of the company’s cloud service offerings or the data center suite is evident from its robust subscription revenues, which soared 56% year over year in the last reported quarter.

However, steep expenses persist to be a drag on the company’s margins and its bottom line too. The company’s increasing investments in research and development and its go-to-market sales strategy might hurt margins in the near term.

Additionally, salary hikes to the team and the payroll tax reset associated with employee expenditures are likely to leave margins stressed in the to-be-reported quarter.

Atlassian Corporation PLC Price and EPS Surprise

Atlassian Corporation PLC Price and EPS Surprise | Atlassian Corporation PLC Quote

What Our Model Says

Our proven Zacks model clearly shows that a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has significant chances of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Atlassian currently carries a Zacks Rank #2, which increases the predictive power of ESP. However, its Earnings ESP of 0.00% in the combination makes surprise prediction difficult for the stock this reporting cycle.

Stocks to Consider

Here are some stocks worth considering as our model shows that these have the right combination of elements to beat on earnings this time around:

Acacia Communications, Inc. ACIA has an Earnings ESP of +5.73% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Xilinx, Inc. XLNX has an Earnings ESP of +1.75% and is a #2 Ranked stock.

Gogo Inc. GOGO has an Earnings ESP of +7.99% and is a Zacks #2 Ranked stock.

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Atlassian Corporation PLC (TEAM) : Free Stock Analysis Report
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Gogo Inc. (GOGO) : Free Stock Analysis Report
Xilinx, Inc. (XLNX) : Free Stock Analysis Report
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