tradingkey.logo

Why Atlassian Stock Popped on Wednesday

The Motley FoolJan 15, 2025 5:56 PM

Atlassian (NASDAQ: TEAM) stock enjoyed a modest price bump of 1.7% through 11:30 a.m. ET Wednesday after earlier enjoying a more dramatic gain in premarket trading.

Why is Atlassian rising? Because yesterday, two separate investment banks published notes describing some pretty dramatic pricing power at the software stock.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. See the 10 stocks »

Citi and Barclays both love Atlassian

In separate notes on TheFly.com, first Barclays and then Citigroup pointed out that effective Feb. 11, Atlassian is raising prices on its Jira Service Management, Jira Software, and Confluence products. Prices will rise 23%, 24%, and 29%, respectively, says Barclays, while Citi estimates increases at between 23% and 24%. Both bankers agree that the price hikes will be significantly greater than the 5% to 15% increases Atlassian imposed in 2024.

Commenting on the moves, Citi calls the price hikes "aggressive," which could suggest that Atlassian is making a mistake -- but that's actually not what Citi means at all. To the contrary, Citi describes the price hikes as evidence Atlassian maintains robust pricing power over its rivals, implying the price hikes won't scare customers away and will instead just drop more money to Atlassian's bottom line.

Unsurprisingly in this context, both Barclays and Citi continue to recommend buying Atlassian shares, which Barclays thinks are worth $275 a share and Citi values at $255.

Is Atlassian stock a buy?

But here's the thing: Atlassian stock already costs more than $250. So even if Barclays is right, investors are looking at no more than a potential 10% profit from buying Atlassian stock today, while Citi's forecast implies no more than a 2% profit. That hardly seems like enough potential profit to justify a pair of buy ratings, especially on a stock that hasn't reported a GAAP profit since (checks notes on S&P Global Market Intelligence) 2016!

Granted, Atlassian does generate strong free cash flow of $1.3 billion annually. But on a $64 billion market cap, that works out to a price-to-free cash flow ratio of nearly 50. That's too rich for my blood, no matter what the analysts say.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

  • Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $341,656!*
  • Apple: if you invested $1,000 when we doubled down in 2008, you’d have $44,179!*
  • Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $446,749!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of January 13, 2025

Citigroup is an advertising partner of Motley Fool Money. Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Atlassian. The Motley Fool recommends Barclays Plc. The Motley Fool has a disclosure policy.

Disclaimer: The information provided on this website is for educational and informational purposes only and should not be considered financial or investment advice.

Related Articles

tradingkey.logo
tradingkey.logo
Intraday Data provided by Refinitiv and subject to terms of use. Historical and current end-of-day data provided by Refinitiv. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.
* References, analysis, and trading strategies are provided by the third-party provider, Trading Central, and the point of view is based on the independent assessment and judgement of the analyst, without considering the investment objectives and financial situation of the investors.
Risk Warning: Our Website and Mobile App provides only general information on certain investment products. Finsights does not provide, and the provision of such information must not be construed as Finsights providing, financial advice or recommendation for any investment product.
Investment products are subject to significant investment risks, including the possible loss of the principal amount invested and may not be suitable for everyone. Past performance of investment products is not indicative of their future performance.
Finsights may allow third party advertisers or affiliates to place or deliver advertisements on our Website or Mobile App or any part thereof and may be compensated by them based on your interaction with the advertisements.
© Copyright: FINSIGHTS MEDIA PTE. LTD. All Rights Reserved.