Atlassian Stock Rises 24% in 3 Months: What Should Investors Do?

Atlassian TEAM shares have gained 23.7% in the past three months, outperforming the Zacks Computer Technology sector, Zacks Internet Software industry and the S&P 500’s return of 3.9%, 5.3% and 1.1%, respectively.This growth reflects investors’ confidence in Atlassian's reputation as a leader in the enterprise collaboration and workflow software space. This impressive price surge raises a crucial question for investors: Is it the right time to buy, hold or sell Atlassian stock?Rapid Cloud Adoption Drives TEAM’s GrowthAtlassian is gaining from the ongoing digitalization of work by organizations and the rapid adoption of cloud services. Per a report by Mordor Intelligence report, the global enterprise collaboration market is likely to reach approximately $111.02 billion by 2030 from an estimated $66.79 billion in 2025, witnessing a CAGR of 10.7%. This provides TEAM ample scope to expand its business.Atlassian 3 Months Price Performance ChartImage Source: Zacks Investment ResearchAtlassian is experiencing growth in migration to the cloud with the integration of artificial intelligence (AI) in its entire cloud platform. The company is also trying to add momentum to the cloud migration with the integration of the latest cloud offerings, including Jira Product Discovery Premium, Compass Premium and Guard Premium. TEAM is currently focused on selling more subscription-based solutions. This unique business model is helping the company in generating stable revenues while expanding margins. Subscription-based service is a high-margin business as the incremental cost to add a user declines as the company’s user base increases. Subscriptions have been the company’s fastest-growing segment, which has witnessed a CAGR of more than 43% between fiscal 2020 and 2024.These factors are expected to add immense value to TEAM’s customers, in turn driving Atlassian’s top-line growth. The Zacks Consensus Estimate for Atlassian’s fiscal 2025 revenues is pegged at $5.08 billion, indicating year-over-year growth of 16.64%. The Zacks Consensus Estimate for TEAM’s fiscal 2025 earnings is pegged at $3.18, suggesting year-over-year growth of 8.5%.Short-Term Challenges Persist for AtlassianAtlassian’s near-term prospects might be hurt by softening IT spending. Enterprises are postponing their large IT spending plans due to a weakening global economy amid ongoing macroeconomic and geopolitical issues. This does not bode well for Atlassian’s prospects in the near term.Although TEAM has long been a strong contender in the collaboration and workflow software space, the market has continuously been crowded by industry leaders like Broadcom AVGO, Microsoft MSFT, Alphabet GOOGL, Salesforce and IBM.Atlassian’s JIRA software matches solutions like Broadcom’s Rally Software, Microsoft’s Azure DevOps Server and IBM’s Rational. TEAM’s Confluence product competes with Salesforce Chatter and Alphabet’s Google Apps for Work.Increasing competition has forced Atlassian to spend more on its research and development (R&D) to keep a lead in the market. Atlassian’s R&D costs increased due to rising investment in artificial intelligence to enhance its product capabilities. In the last reported financial results for first-quarter fiscal 2025, its non-GAAP R&D expenses soared 23.7% year over year compared with revenue growth of 21.5%. Increased R&D expenses negatively impacted profitability, with non-GAAP operating margin contracting 40 basis points.Furthermore, Atlassian’s decelerating customer growth rate makes us increasingly cautious about its near-term prospects. The company’s customers have witnessed a CAGR of 14.7% between fiscal 2020 and 2024, much lower than the 30% CAGR it registered between fiscal 2016 and 2020.Zacks RankAtlassian currently carries a Zacks Rank #3 (Hold), implying that existing investors should hold the stock while new buyers should wait for a better entry point into the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Free: 5 Stocks to Buy As Infrastructure Spending SoarsTrillions of dollars in Federal funds have been earmarked to repair and upgrade America’s infrastructure. In addition to roads and bridges, this flood of cash will pour into AI data centers, renewable energy sources and more.In, you’ll discover 5 surprising stocks positioned to profit the most from the spending spree that’s just getting started in this space.Download How to Profit from the Trillion-Dollar Infrastructure Boom absolutely free today.Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Microsoft Corporation (MSFT): Free Stock Analysis Report Broadcom Inc. (AVGO): Free Stock Analysis Report Alphabet Inc. (GOOGL): Free Stock Analysis Report Atlassian Corporation PLC (TEAM): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks