JMP: Atlassian Embracing The Emerging Trend
Atlassian is capitalizing on the trend of cloud adoption that is vesting the responsibility for maintaining quality, reliability and security of cloud offerings with developers, JMP Securities analyst Patrick Walravens said in a note. The analyst said the company is moving aggressively into the $20 billion IT operations and service management space, currently dominated by ServiceNow Inc (NYSE: NOW ).
The analyst termed Q3 guidance a bit muted, relative to the solid Q2 beat, given the company's plan to expand organic headcount, increase salaries and continue investment in its cloud infrastructure. As such, JMP raised its EPS estimates for FY2019 and FY2020.
Walravens maintained a Market Perform rating on shares.
Raymond James: Atlassian Shares Fairly Valued
Atlassian's billing accelerated to 49 percent growth in Q2, beating estimates by 10 percent, as highlighted by Raymond James analyst Michael Turits. Billings benefited from early renewals of maintenance contracts ahead of the annual price increase, effective Jan. 9, and the shift to multi-year contracts.
The topline beat, according to the analyst, drove 3 points of operating margin and 4 cents of EPS upside. However, higher expenses related to hiring among other things were pushed back to the second-half, rendering the margin outlook muted.
Despite the impressive performance, Raymond James said shares are fairly valued, given the potential increased sales investment, increased competition with ServiceNow as focus shifts to IT and a less clear path without messaging to participation beyond IT in the enterprise collaboration market.
Turits reiterated a Market Perform rating.
DA Davidson Continues To Recommend Despite Impressive Run
Apart from the key metrics, other key takeaways include Atlassian's 100,000 cloud customers, accounting for 75 percent of total customers, its efforts to increase penetration of Opsgenie and the conservative but above-consensus FY2019 guidance, DA Davidson analyst Rishi Jaluria said in a note.
"While Atlassian is up an impressive 113% from 2018 to today, inclusive of the aftermarket move (vs. NASDAQ up 2%), we continue to recommend Atlassian for its unique sales model, attractive combination of growth and cash flow, and market leadership position in the increasingly-important collaboration software market," Jaluria wrote in the note.
The analyst maintained a Buy rating and raised the price target from $108 to $118.
Atlassian shares closed Friday's session down 2.4 percent at $90.67.
NOW Is The Time; Analyst Explains Why ServiceNow Is Still A Buy
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