Atlassian’s Stock Price Target Cut (TEAM) on Pricing Concerns

Atlassian Corporation (NASDAQ: TEAM), the enterprise software giant known for its popular collaboration tools like Jira and Confluence, has seen it's stock price target trimmed at BMO Capital.

BMO Capital adjusted its price target down to $295 from the preceding target of $360. Despite this change, BMO Capital maintained an Outperform rating on Atlassian's shares. The adjustment followed the company's Team 2025 event, an occasion that offered detailed insights into Atlassian's operational dynamics and strategic orientation.

The stock is currently priced at $198 after a 2.20% gain on the week, with significant perceived upside to the revised target.

Crucial to BMO Capital's assessment was the commentary concerning Atlassian's Rovo platform, specifically noting a meaningful decline in the service costs. However, a new set of pricing changes has sparked queries regarding the price elasticity curve's trajectory, suggesting uncharted challenges in Atlassian's future pricing strategies. BMO Capital's reduced price target admittedly mirrors the economic context's influence, reflecting the adjustments made in light of current macroeconomic factors.

Despite the stock's struggles this year (down 18.3%), Atlassian's underlying business demonstrated strength in its last financial report. For its fiscal second quarter ending December 31, 2024 (reported January 30, 2025), the company posted revenue of $1.29 billion, handily beating consensus estimates that clustered around $1.23-$1.24 billion.

The bottom line was even more impressive, with Adjusted Earnings Per Share (EPS) coming in at $0.96, significantly outperforming expectations ranging from $0.62 to $0.75. Even the GAAP loss per share was narrower than analysts had projected. This strong operational execution provides a fundamental underpinning that contrasts sharply with the recent share price depreciation.

Looking ahead, all eyes are on the upcoming fiscal third-quarter results, expected towards the end of the month. Wall Street analysts are forecasting continued growth, projecting revenue around $1.35 billion and Adjusted EPS in the range of $0.90 to $0.93.

While these estimates suggest sequential growth, the adjusted EPS forecast is slightly below the prior quarter's significant beat. Meeting or exceeding these expectations, coupled with positive forward guidance, will be crucial for potentially reversing the negative stock momentum.

The company's fundamental performance, particularly its ability to consistently beat earnings estimates, presents a compelling argument for long-term value. However, this is currently overshadowed by significant technical pressure and negative short-term market sentiment. The upcoming Q3 earnings report looms large as a critical catalyst.