On Tuesday, KeyBanc initiated coverage on Atlassian (NASDAQ:TEAM) Corporation stock (NASDAQ:TEAM), assigning a Sector Weight rating. The firm highlighted Atlassian's strong position in the developer collaboration market, particularly with its Jira Software and Confluence products.
KeyBanc sees a long-term growth opportunity for Atlassian as it transitions from data center (DC) to cloud-based services and expands into new markets such as IT Service Management (ITSM).
The analyst believes that while the migration from DC to cloud presents a significant opportunity, the process will likely be gradual. The rating reflects a viewpoint that Atlassian's shares are currently fairly valued, with the firm citing a valuation of 11 times the fiscal year 2026 enterprise value (EV) to sales and 42 times EV to free cash flow (FCF).
KeyBanc's stance is cautiously optimistic, looking for further evidence to strengthen confidence in Atlassian's growth trajectory. Specifically, the firm is monitoring the pace and scale of the company's DC to cloud migration, the success of its sales and marketing strategy following the end of life (EOL) for its server products, and the potential for maintaining over 20% growth with a path to mid-20% operating margins or better.
The assessment by KeyBanc suggests that investors take a measured approach, weighing the current valuation against the company's prospects for growth and profitability in the coming years. The firm's Sector Weight rating indicates that Atlassian's stock is expected to perform in line with the average returns of the sector over the next 12 to 18 months.
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