Why Atlassian (TEAM) Stock Is Trading Up Today
What Happened:
Shares of IT project management software company, Atlassian (NASDAQ:TEAM) jumped 5.2% in the morning session after the macro provided a tailwind, as many tech stocks flashed green. Specifically, the yield on the 10-year Treasury fell below 4.3%, the first time it has dropped to these levels since September 2023. There seems to be increased optimism in the market that because inflation is stabilizing, interest rates could stabilize or even move lower. As a reminder, lower rates are a good for stock valuations, especially for tech companies where the market needs to discount back cash flows further out in the future. When the math is done to discount these cash flows back to today, a lower assumed discount rate leads to higher present values.
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What is the market telling us:
Atlassian's shares are very volatile and over the last year have had 36 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 27 days ago, when the stock dropped 14.3% on the news that the company reported first quarter results with revenue guidance for next quarter falling below analysts' expectations. Management expects ongoing macroeconomic uncertainties to hurt growth in paid seat expansion and free-to-paid conversion rates, assuming that the trends observed in the past year persist into FY24. Additionally, they anticipate varying Cloud and Data Center revenue growth rates as customers migrate to the new platform following the end-of-support for the Server offering, assuming that migration rates will follow historical trends and some Server customers may not migrate in FY24. On the other hand, Atlassian narrowly topped analysts' revenue expectations during the quarter. For the full year, cloud revenue growth was reaffirmed, and operating margin guidance was raised. Overall, the results could have been better.
Atlassian is up 56.8% since the beginning of the year, and at $198.29 per share it is trading close to its 52-week high of $214.03 from September 2023. Investors who bought $1,000 worth of Atlassian's shares 5 years ago would now be looking at an investment worth $2,364.
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