Atlassian (TEAM): Gauging Valuation Following Bold AI-Focused Acquisitions and Business Model Shifts

Atlassian (TEAM) recently made headlines with its acquisition of engineering intelligence company DX, along with The Browser Co. These acquisitions are both aimed at boosting its artificial intelligence capabilities. These strategic moves have sparked responses from both analysts and investors.

See our latest analysis for Atlassian.

Despite Atlassian’s headline-making AI acquisitions, the momentum hasn’t translated to the stock lately. Shares have dropped 38% year-to-date, and the past year’s total shareholder return sits at -21%, reflecting both market caution and ongoing debate over its path to profitability. Recent deals and news are fueling long-term optimism, but investors are still waiting for solid short-term results.

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With the stock well below analyst targets, but concerns lingering over profits and business model changes, investors face a key question: Is Atlassian undervalued after its recent pullback, or is future AI growth already priced in?

Most Popular Narrative: 39.9% Undervalued

Atlassian’s most followed narrative suggests its true fair value sits far above the current stock price. This gap is fueling speculation about whether bold growth assumptions can close it in the years ahead.

Accelerating adoption of AI-powered features and investments in integrating AI deeply into Atlassian's core cloud platform are expanding differentiated use cases, leading to higher user engagement, greater value per customer, and increased opportunities for premium upsells. These factors support future revenue growth and margin expansion.

Read the complete narrative.

Wondering what’s behind this substantial discount? Analysts are factoring in ambitious earnings and revenue growth, bigger margins, and a market multiple that breaks the mold. Only a deep dive reveals how these bullish forecasts stack up against industry norms. Could one bold assumption change the game? Find out what’s driving this eye-opening target.

Result: Fair Value of $249.51 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, if AI monetization stumbles or enterprise cloud migrations slow, Atlassian’s ambitious growth projections could face meaningful setbacks and challenge the bullish thesis.

Find out about the key risks to this Atlassian narrative.

Another View: A Multiples-Based Perspective

Taking a closer look at Atlassian's valuation compared to its industry, the company's price-to-sales ratio stands at 7.5x. This is noticeably higher than the US Software industry average of 5.1x and makes Atlassian appear expensive by this yardstick. However, when measured against peers whose average is 13.6x and a fair ratio of 13.7x, Atlassian's current price does not look quite as stretched. Investors should weigh what this gap means: is the stock at risk of sliding toward industry levels, or could renewed optimism send it up toward that fair ratio?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Atlassian Narrative

If you have a different perspective or want to dive into the numbers yourself, it’s easy to shape your own view in just a few minutes with Do it your way.

A great starting point for your Atlassian research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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