Atlassian's Strategic Loom Acquisition Could Be A Game-Changer for Collaborative Workflows, Analysts Say

Canaccord Genuity analyst David Hynes Jr reiterated a Buy rating on Atlassian Corp TEAM with a price target of $230.

Atlassian announced an agreement to acquire Loom, a video messaging platform, for $880 million in cash and $95 million in vesting equity. Notably, this includes cash acquired, with Loom raising an estimated ~$200 million. 

It will be funded with Atlassian's existing cash balance but will not impact its share repurchase strategy and will be slightly dilutive to operating margins in FY24 and FY25. 

Loom's integration into the Atlassian platform will add asynchronous video communication to the repertoire of tools its users can use to collaborate, allowing them to plug asynchronous video directly into workflows in Jira and systems of record in Confluence. 

The deal, unsurprisingly, comes at a sizable discount to Loom's last funding round in 2021, when it raised $130 million at a $1.5 billion valuation. 

His best guess is perhaps $50 million - $100 million in ARR based on a combination of employee and user count. If that's the case, that would imply a valuation of 10-20x ARR, which would certainly be rich in this environment. The analyst projects Q1 sales of $970 million and EPS of $0.54.

Mizuho analyst Gregg Moskowitz maintained a Buy rating with a price target of $240.

This is a sizable purchase for TEAM, but the analyst views Loom as a very complementary addition in that TEAM will be able to integrate Loom's popular async videos throughout its platform. 

As the world shifts toward more distributed work, easing communication across time zones and locales are becoming increasingly critical. Furthermore, TEAM's platform should suit various Loom use cases well. Most compelling in his view is the ability for Loom to be incorporated into crucial Jira workflows and to plug into Confluence. 

Most notably, the analyst sees meaningful cross-selling opportunities given the complementary nature of Loom to TEAM's collaborative platform and that both have extensive installed bases.

The analyst projects Q1 sales of $965.3 million and EPS of $0.53.

Price Action: TEAM shares traded higher by 1.81% at $189.88 on the last check Friday.