Atlassian stock price continued its strong downward trend, mirroring the performance of other software companies. TEAM plunged to a low of $100, down sharply from last year’s high of $325 and the all-time high of $482. So, will the stock rebound or crash after earnings?
Atlassian stock has plunged ahead of earnings
Atlassian, the parent company of products like Jira, Confluence, the Browser Company, Loom, and Trello, has crashed in the past few years as its insiders continued dumping the shares.
Most recently, the stock has plunged as demand for software companies has continued to wane amid growing concerns about the artificial intelligence (AI) industry.
There are also concerns about the company’s business and the soaring competition. At the same time, investors are concerned about the rising competition in the software space.
As we wrote on these software stocks, fears that AI tools will disrupt its business are not real. In reality, these software companies will use the AI tools to complement their businesses.
TEAM stock price has crashed as the company has moved into an acquisition spree as it seeks to grow its AI tools. It acquired The Browser Company, the creator of Arc and Dia browsers. It also bought DX, a company that helps engineering teams to improve their work.
The next important catalyst for the Atlassian stock price will be the upcoming financial results, which will provide more color about its business. Wall Street analysts expect the revenue to come in at $1.54 billion, up by 20% YoY.
If this is accurate, Atlassian’s annual revenue will be $6.31 billion, up by 20% YoY. The most optimistic analyst expects the annual revenue will be $6.45 billion.
Atlassian’s earnings per share (EPS) is also expected to continue growing, reaching $1.14 from 96 cents in the same period in 2024. Also, the annual EPS will come in at $4.88, up from $3.68 in 2024.
Atlassian valuation has improved
A key benefit for the Atlassian stock is that its valuation has become favorable, with the forward price-to-earnings ratio 21, lower than the sector median of 25. The valuation multiple is much lower than the five-year average of 111.
The company’s forward PEG ratio is 1.05, much lower than the sector median of 1.52. At the same time, the company’s rule-of-40 multiple is also favorable as its operating margin is 22.5% while its forward revenue growth is 20%, giving it a multiple of 42%.
Therefore, the most likely scenario is where the stock bounces back after its financial results. This rebound will happen if it publishes strong financial results.
Analysts are largely bullish on the company, with the average target of $224, much higher than the current $105.
TEAM stock price technical analysis
The weekly chart shows that the TEAM stock price has crashed from a high of $325 in February to a low of $105. It has moved below the important support level at $113, its lowest level in February 2022.
The stock has remained below all moving averages, while the Relative Strength Index (RSI) has moved to the oversold level of 30.
Therefore, technicals suggest that the stock will continue falling, potentially to $100. However, a rebound is also possible, especially if the company publishes strong financial results.
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