Atlassian (NASDAQ:TEAM) suffered a tough blow this earnings season. The Australian software producer recently issued an adjusted earnings forecast that fell below Wall Street expectations. These disappointing numbers are in keeping with the difficult year the company has battled. And while falling on profit guidance never helps investor confidence, today hasn’t brought all bad news for the company. TEAM stock has been falling all day, but some analysts feel a turnaround is in sight.
What’s Happening With TEAM Stock
The disappointing earnings call has prompted analysts to lower their expectations for TEAM stock to 27 cents per share. For the fourth quarter of 2021, the company expects revenue to be “in the range of $710 million to $725 million,” opposite the $687.4 million predicted by Wall Street.
Following the recent earnings report, TEAM is moving steadily downward. It began the trading day with a pop, but it did not take long for the stock to reverse direction and start falling. As of this writing, shares are down 13% for the day and are poised to close out the week in the red. Yesterday, TEAM rose in anticipation of the earnings report, but today’s decline has pulled it down by 8%.
Why It Matters
While Atlassian has spent most of the year struggling, TEAM stock warrants a closer look. The company is in transition, moving toward a cloud-computing-centric business model. Its on-premise software packages used by corporate clients in data centers are slowly being phased out. The demand for project management software isn’t going away anytime soon. However, the market is becoming oversaturated, and Atlassian is working hard to adjust and stay ahead of competitors.
Despite the recent earnings miss, some experts remain bullish on TEAM stock. TipRanks analysts rate it as a “moderate buy,” with no one issuing a sell rating. Arjun Bhatia of William Blair still regards it as a “buy.” “Overall, this was another strong quarter from Atlassian,” he states. “We see a lot to like about this story going forward, particularly with the strength it is seeing in Jira Service Management and the large upsell opportunity presented by the cloud migration.”
Morgan Stanley (NYSE:MS) analyst Keith Weiss recently lowered his TEAM stock price target but maintains an “outperform” rating. “For investors with a longer-term time horizon, highly attractive cloud transition, solid unit economics, strong market positioning and pragmatic investments for growth will continue to make Atlassian one of the most durable 30% growth stories in software,” he stated in a recently issued note to investors.
What It Means
Investors shouldn’t ignore the overall positive Wall Street consensus. While TEAM stock has struggled this year, it has the type of strong fundamentals that could help it recover in the coming months. As Weiss noted, investors will need to adapt a longer-term outlook to see TEAM as the buy-the-dip opportunity that it is. However, in many cases, patience pays dividends. And in the case of Atlassian, the dividends can be large. The stock was a 2021 winner for some investors, and it can be again.
TEAM stock is not a name that investors should dismiss. Rather, it is a name to watch closely as market momentum shifts in its favor.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
