Atlassian ‹› $TEAM

A certain sense of futility arose within $TEAM shorts when a date was determined in which the moon came down & bounced upon us all.

By Lucky 33

Atlassian ‹› $TEAM

TLDR

14-Sep-21 › 390.11 ↑ 0.2%  

📈 8.1m / 7 trades 📉 0 🐜

15-Sep-21 › $TEAM ⤳ 240 17-Sep-21 c ↑ 904% 👽

15-Sep-21 › 395.53 ↑ 1.4%  

📈 109.6m / 51 trades 📉 0 🐜

Atlassian › TEAM ‹› ☎️  240 17-Sep-21c ↑ 965% 👽✨ 

16-Sep › 394.40 ‹› 17-Sep ‹› ↑ 403.91 +9.38 ↑ 2.4%  

📈 support › 400.07 ‹› 📉 resistance › 404.15

📈 $ 65.9m / 49 trades ‹› 📉 $ 846.3k / 3 trades 

📈 🐍 x 49 𝑥¯ 2.15m v.s. ‹› 📉 🪡🐁 x 3 𝑥¯ 282k = ↑🐍

Connected Enterprise

Atlassian › TEAM › produces software that helps teams work together more efficiently & effectively › offering a broad set of › easy to deploy & use tools ⤳ Jira › Confluence › Bitbucket › Trello.

83% of Fortune 500 companies use Atlassian software products › utilized by more than 212K customers at both large & small organizations › for open teamwork models & autonomous project planning & management › that provides an environment for enterprises to experiment & optimize employee experience › for frictionless work environments › business partners › in a connected vendor ecosystem › for easy interaction back & forth & quick response to market signals › & connect with customers › to deepen relationships via those processes.

As teamwork becomes increasingly digital › investing in a connected enterprise is the clear path forward for 10 million monthly active users who use Atlassian cloud collaboration management tools & help desk solutions › to support a variety of collaboration styles & provide standardization to innovate & cut costs. 

Atlassian operates in 4 segments ⤳ 1 › subscriptions › term licenses & cloud agreements ⤳ 2 › maintenance › annual maintenance contracts that provide support & periodic updates & are generally attached to perpetual license sales ⤳ 3 › perpetual license › upfront sale for indefinite usage of the software ⤳ 4 › other › training › strategic consulting & revenue from the Atlassian Marketplace app store.

First Mover Advantage

What sets Atlassian apart is its first mover advantage in its core market. Given the time sensitive nature & delivery windows of most software projects › most of Atlassian's customers simply don’t have the appetite for risking project execution nor the time to adopt a new platform. This has resulted in creating a moat ›  as there are indirect costs associated with the learning curve & switching altogether to another platform. 

Atlassian delivers the tools & platforms that developers need to build applications › with every company in every sector becoming a software-driven company › there will be almost infinite demand for new applications. As developers raced to build new applications to help their companies cope with the pandemic › they gravitated toward the tools that enabled them to work the fastest & most efficiently. Every company from the smallest mom & pop shop to the largest multinational realized with utmost clarity that they would live or die by software.

“We are a multi-product company. We differ from many companies that get product/market fit & grow to $500 million in revenue before their second product. We introduced a second product › Confluence › before we reached that scale. We found that customers perceived that software documentation is poor — we developed a product for document collaboration that’s like a Google Doc on steroids. We have multi-product in our DNA. We now have 14 different products.” ⤳ Cameron Deatsch - Chief Revenue Officer.

Atlassian applies the now-popular agile systems development mindset to all its operations. 

“As far as process › we use an agile approach. This differs › from the traditional waterfall approach › in which system requirements are developed over two years & handed off to the systems development people to build. With agile › we start with customer goals & iteratively build versus the goals. Every two weeks we ship something & learn from it. We can apply this approach to marketing › closing the books › & so on. We have daily stand-ups & two week sprints."

Customer Growth

Atlassian products meet a unique market need for business customers › modernizing collaboration through human-centered technology ⤳ including office productivity tools › video conferencing platforms › file synchronization › sharing solutions › content management apps & more ⤳ empowering companies to design experiences that unlock less fragmented workflows & bring people together in seamless › interconnected & digital experiences.

They are able to land customers at a low cost with little human intervention. In the latest quarter › Atlassian brought in 17k new customers who never talked to people at Atlassian or its partners › equating to a robust 9.5% sequential QoQ growth › driven by 5.7k  Trello accounts › as a result of new product features & TEAM’s recent sales funnel optimization initiatives.

The addressable market size in total is an estimated $125 billion › in terms of potential users › including 800 million knowledge workers at the highest level › drilling down to 100 million technical team members & 23 million software developers. Atlassian noted during the recent industry conference › the company continues to out its online ecosystem › with a marketplace for over 4k apps that utilize its product technology ⤳ recently launched Forge › which provides runtime for these apps.

Atlassian invents new products through processes propelled by its employees. › it builds on its strengths ⤳ a focus on teams› of which there are many different kinds in different industries › come up with new products by looking at customer use cases & trends outside the norm. Service management is the fastest growing product.

Revenue Growth

Atlassian continues its strong track record of growth › Q3’21 revenue growing 38% YoY › driven by subscription revenue growth of 43% YoY. Subscription now comprises 62% of TEAM’s total revenue & its recurring nature helps to smooth out the revenue stream › resulting in higher predictability.

Atlassian has grown impressively over the past few years because it adopts a low-cost web-based marketing & lean transactional operating model › going without a traditional enterprise salesforce & marketing team. Atlassian has a large opportunity ahead › demonstrating strong profitability relative to peers › with a gross profit margin of 84% › far higher than the 49% sector average › a strong balance sheet & plenty of cash to fund future growth initiatives › its FCF margin is 43% › comparing favorably to 12.6% sector median. 

Given the subscription-heavy nature of the business › Atlassian's revenue stream has resulted in sequential quarterly revenue growth over at least the past 3 years & this includes pandemic quarters. Atlassian stopped new sales of server license › increased pricing & created pull-forward effects that incentivize users to renew early › leading to strong revenue & billings growth. Atlassian has demonstrated impressive revenue growth since its IPO in 2015 › growing by 513% over this timeframe to $1.96 billion for the trailing 12 months. Atlassian maintains a fortress balance sheet to fund growth initiatives › with $1.56 billion in cash & short-term investments › no long-term debt › and just $206M in capital leases.

15-Sep-21 › TEAM has outperformed the market in the last year with a price return of ↑ 133.7% while the SPY ETF gained ↑ 34%. TEAM has also outperformed the stock market ETF in the last 3 month & 2 week periods returning ↑ 57.3% & ↑ 7.5% › respectively › SPY returned ↑ 5.6% & ↓ 0.8%. Last quarter › Atlassian reported $560 million in Revenue & $.24 earnings per share › this beat revenue expectation by $35 million & exceeded earnings estimates by $.06.

Valuation

Potential for competition from legacy software provider Microsoft › MSFT › in the space in which TEAM operates. Atlassian will directly compete against ServiceNow › NOW › as it encroaches on the service desk space. Atlassian’s formal planning processes are adjusted so it can adapt to new threats or opportunities. That’s what happened last year when a competitor’s IPO gave it extra capital to spend on marketing to Atlassian’s customers. Atlassian reprioritized go-to-market resources to keep customer acquisition up in light of that competitor’s spending. One product leader got less. They have OKRs & they adjust.

The reason usually for companies like $TEAM to morph overnight is that they operate in a fast-changing environment & one should not be expected to predict what the stock is going to be worth in 6 months › because 6 months suddenly feels like 6 minutes › that may be true.

Also what's true is that once a $TEAM is established › or committed to a line of attack › it must remain in a state of pure possibility. A Bloomberg terminal recently pointed out what must be one of the purest examples of pure possibility › a management software company called Atlassian. Atlassian is smaller than its software cousins. It has a market capitalization of 97.4 billion. Still it stock price has soared-up more than two-fold to 394.5 since last year.

What distinguishes Atlassian is the spirit in which it doesn't have to do anything. The mere fact that Atlassian is a public company › with the share price that goes up everyday › apparently makes it desirable to an investor that wants to avoid the hassle & the wait involved in cycles of steady growth. Atlassian offers itself as a kind of supernatural bandwagon › albeit one that resembles a spacecraft & without wheels.

This is the beauty of Atlassian. by doing nothing › it has avoided ruling out the possibility of not doing something else. It's list of possible ventures includes › but not limited to › high tech › supernatural resources & communications › r&d › icenses › maintenance › consulting & all software related industries › leaves itself open to so many opportunities & of course there aren't any risks here. it has extremely unlimited assets & sources of revenue.

But the most telling passage of the possibility-disclosure section in Atlassian's confessional is the one that describes, incredibly, the dangers competitors face. You might think that Atlassian does nothing, & which is something looking to be ironically stated › would have the field to itself › but no › as the beautiful company website explains ›

G’day, we’re Atlassian. We make tools like Jira & Trello that are used by thousands of teams worldwide. & we’re serious about creating amazing products, practices, & open work for all teams.

Indeed, they are.

Byline

This article was written by Dogefather's protégé › who ascertains as a result of research › to provide thorough › readable › analysis. His trading strategy is Long only › value › growth › with a medium to long-term horizon. He is generally wary of tech stocks › as this sector is ripe for disruption. However › due to Atlassian's steady predictability & rapidly growing revenues › he aggressively solicits a posture of Atlassian long game › as one can make room in a portfolio for tech companies that are the disruptors that carry a moat. 

Disclosure

14-Sep-21 › 390.11 ↑ 0.2%  

📈 8.1m / 7 trades 📉 0 🐜

15-Sep-21 › $TEAM ⤳ 240 17-Sep-21 c ↑ 904% 👽

15-Sep-21 › 395.53 ↑ 1.4%  

📈 109.6m / 51 trades 📉 0 🐜

Atlassian › TEAM ‹› ☎️  240 17-Sep-21c ↑ 965% 👽✨ 

16-Sep › 394.40 ‹› 17-Sep ‹› ↑ 403.91 +9.38 ↑ 2.4%  

📈 support › 400.07 ‹› 📉 resistance › 404.15

📈 $ 65.9m / 49 trades ‹› 📉 $ 846.3k / 3 trades 

📈 🐍 x 49 𝑥¯ 2.15m v.s. ‹› 📉 🪡🐁 x 3 𝑥¯ 282k = ↑🐍

a boy brings his pet viper to work which intrigues some of his team but frightens others. 

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