Is Atlassian Stock a Bargain After the 34% Drop in 2025?

• Wondering if Atlassian shares are a bargain right now, or if they're getting ahead of themselves? Let's dig in and see whether the company's current price matches up with its potential.
• The stock has seen significant ups and downs lately, dropping 5.1% over the past week and ending 34.3% lower so far this year. This has sparked questions about where value and risk truly lie.
• Recent headlines have put Atlassian in the spotlight for its continued push into cloud-based collaboration software, drawing both investor optimism and skepticism. There has also been plenty of chatter about the impact of tech sector shifts and evolving customer preferences, which helps explain these sharp moves.
• Right now, Atlassian scores a 4 out of 6 on our valuation checks. This means it is undervalued according to most metrics, but let's explore what those checks actually mean and why there may be an even better way to judge value by the end of this article.

Find out why Atlassian's -16.4% return over the last year is lagging behind its peers.

Approach 1: Atlassian Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company's intrinsic value by forecasting its future cash flows and discounting them back to today's money. This provides a present value that reflects all expected growth and risk.

For Atlassian, the most recent Free Cash Flow stands at $1.42 billion. Analysts project this to grow significantly, with estimates reaching $3.5 billion by 2030. Forecasts for the next five years are based on analyst predictions, while figures beyond that are extrapolated by Simply Wall St using historical and expected growth rates.

Based on these projections, the DCF model estimates Atlassian's intrinsic share price at $280.15. This figure suggests the stock is trading at a 43.1% discount to its underlying cash flow potential.

In summary, the DCF model points to Atlassian being notably undervalued relative to its growth outlook and future cash flows. This sizable discount could signal an attractive entry point for long-term investors.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Atlassian is undervalued by 43.1%. Track this in your watchlist or portfolio, or discover 851 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Atlassian.

Approach 2: Atlassian Price vs Sales

The Price-to-Sales (P/S) ratio is often the go-to valuation metric for technology companies like Atlassian, which are focused on rapid revenue growth and reinvestment over near-term profits. It helps investors gauge how much they are paying for each dollar of revenue, providing a straightforward way to compare companies that may not yet be highly profitable.

A suitable P/S ratio takes into account not just current growth, but also expected future expansion, profit margins, and risk profile. Companies with higher growth prospects or stronger market positioning generally justify higher multiples, while increased business risk or slower expansion can bring those ratios down.

Atlassian currently trades at a P/S ratio of 8.0x. This is above the Software industry average of 5.2x but below the peer average of 12.7x. More importantly, Simply Wall St’s proprietary Fair Ratio for Atlassian is 13.9x, which factors in the company's specific growth expectations, market cap, profit margins, and the unique dynamics of its industry.

Unlike a simple peer or industry comparison, the Fair Ratio provides a much clearer picture by integrating both upside and risk. It recognizes that companies with exceptional growth prospects or market leadership, like Atlassian, might deserve a premium relative to the broad sector.

Comparing the Fair Ratio of 13.9x to Atlassian’s current multiple of 8.0x, the stock appears substantially undervalued on this basis.

Result: UNDERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1396 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Atlassian Narrative

Earlier we mentioned that there's an even better way to understand valuation, so let's introduce you to Narratives. Narratives are a simple but powerful approach that go beyond the numbers by connecting your own perspective, the “story” you see unfolding for a company, to the financial assumptions and forecasts behind its fair value.

With Narratives, you can clearly lay out why you believe Atlassian might outperform or underperform, creating a transparent thread from your business reasoning through to your projected revenue, earnings, and margins, and finally to a concrete fair value estimate. This makes it easier than ever to see how different assumptions or news can change a company's outlook, thanks to dynamic updates as new information emerges.

Millions of investors already use Narratives on the Simply Wall St Community page to explore ideas, see what others think, and make smarter buy or sell decisions by comparing a narrative’s fair value to the current share price. For example, while some see Atlassian’s fair value as high as $320 per share if cloud expansion and AI pay off, others argue a more cautious $196 is justified if migration or margin risks play out instead.

Ultimately, Narratives turn valuation into a transparent, personal, and continually evolving tool so you can invest with greater confidence and clarity.

Do you think there's more to the story for Atlassian? Head over to our Community to see what others are saying!

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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