Shares of a workplace software company Atlassian Corporation (NASDAQ: TEAM)author of Jira and Confluence, fell 6.3% as of 10:45 a.m. ET on Thursday.
Guggenheim analyst Howard Ma may be the reason.
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Ma lowered his price target on Atlassian shares to $115 this morning, a nearly 40% cut in his valuation of the stock, as TheFly.com reported today. That sounds bad, but it’s worth noting that Atlassian stock is currently trading below $60 per share. So while the price target was cut almost in half, the analyst still predicts Atlassian shares could nearly double over the next 12 months.
And he still thinks Atlassian stock is a buy. He still believes Atlassian has a “deep technological moat… that AI cannot easily replace.”
So why reduce the price target? Well, even if AI doesn’t completely disrupt Atlassian’s business model, it can still slow it down, limit its market share, or at least slow its expansion into that market as potential customers test out AI before ultimately deciding to pay for Atlassian’s software products.
That is the short-term threat. Over the long term, however, Wall Street analysts generally agree that Atlassian has a long path of growth ahead of it and forecast average annual earnings gains of 20% over the next five years. With shares costing less than 13 times current free cash flow, Atlassian stock looks cheap to me.
And the current share price drop could be a buying opportunity in disguise.
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