Morgan Stanley Ends Bearish Atlassian Stance: 'It's Hard To Be Underweight Great Companies'

Morgan Stanley increased its price target for Atlassian Corporation PLC TEAM Thursday on the basis of the software company's growth prospects over the next five years.

The Analyst

Keith Weiss upgraded Atlassian from Underweight to Equal-Weight and lifted the price target from $99 to $145.

The Thesis

Atlassian is among the great companies in software given an expanding portfolio of best-of-breed solutions, product innovation, a committed customer/partner community, an efficient distribution model and a thoughtful and skilled management team, Weiss said in a Thursday note. (See his track record here.) 

"It's hard to be Underweight great companies," the analyst said. 

The new stack of technologies supporting modern application architectures are a $50-billion market opportunity, growing at a more than 20-percent CAGR through 2023, he said.

"With our negative catalyst for realigning the TEAM valuation having past (Q3 results) and increased confidence in the durability of company's top-line growth, we find it untenable to remain underweight on the shares." 

Atlassian, with its more than 40-percent year-to-date rally and valuation multiple of 48 times its upwardly revised 2020 free cash flow estimates, is too expensive to buy at current levels, Weiss said. 

Morgan Stanley said it's awaiting a more attractive entry point to become more aggressive on the shares.

Goldman Sachs upgraded the stock May 8 from Neutral to Buy and raised the price target from $115 to $125. 

Price Action

Atlassian shares were trading up 0.87 percent at $127.35 at the time of publication Thursday. 

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