Taking Stock of Atlassian Corp’s Risk Factors

Atlassian Corp. (TEAM) provides team collaboration and productivity software products globally. These include Jira Software, Confluence, Jira Service Management, Trello, Bitbucket and Jira Align. Buoyed by its Q4 performance, Atlassian’s shares are up almost 30% over the past month.

Let’s take a look at the financial performance of the company and see what has changed in its key risk factors that investors should be aware of.

On the back of a 50% rise in subscription revenue, Atlassian’s Q4 revenue surged 30% year-over-year to $560 million, beating analysts’ estimates by $34.2 million. It remains focused on agile development, IT service management and work management for teams.

The Co-founder and Co-CEO of Atlassian, Mike Cannon-Brookes, said, “We are incredibly proud of our resilience and execution during fiscal 2021. We continue to innovate with five new products built on top of our cloud platform, surpassed 200,000 customers and $2 billion in revenue, and added over 1,500 new Atlassians to the team.”

Earnings per share dropped $0.01 year-over-year to $0.24 but beat consensus by $0.06 per share. (See Atlassian stock chart on TipRanks)

Additionally, Atlassian sees its Q1 2022 revenue in the range of $575 million and $590 million. Earnings per share are expected to be between $0.38 and $0.39.

Recently, Citigroup analyst Tyler Radke reiterated a Buy rating on the stock with a price target of $400 (upside potential of 18.4%). Along with Atlassian’s cloud strength and data center momentum, the analyst noted that the 50% growth in subscription revenue was the best in six quarters.

Based on 10 Buys and 6 Holds, consensus on the Street is a Moderate Buy. The average Atlassian price target of $324.83 implies 3.9% downside potential.

Now, let’s look at what has changed in the company’s key risk factors.

According to the new Tipranks’ Risk Factors tool, Atlassian’s main risk category is Finance & Corporate, which accounts for 42% of the total 66 risks identified. Since June, the company has added two key risk factors.

Under Debt & Financing, the company highlights that its credit facility and overall debt level may limit the flexibility in getting additional financing or go after other business opportunities or operating activities.

Under Accounting & Financial Operations, the company highlights key risks related to business, IT, IP, data security, data, legal, accounting and ownership structure. Atlassian’s rapid growth makes it difficult to gauge its future performance and the risk remains that it may not continue to grow at similar rates. Atlassian’s business is dependent on the renewal of subscriptions and maintenance plans, purchase of additional subscriptions and licenses by customers. A decline in customer retention or expansion could impact the company.

Additionally, Atlassian’s business relies on affordable pricing and a high number of transactions. Its business ability could be harmed as competitors introduce lower cost or free products.

The company also notes that it has a dual-class structure of its shares, which concentrates voting control in the hands of its Co-CEOs and their affiliates. This may limit other shareholders’ ability to have a say and influence the outcome of important transactions.  

The Finance & Corporate risk factor’s sector average is at 39%, compared to Atlassian’s 42%.

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