1. Atlassian (NASDAQ:TEAM)
Number of Hedge Fund Holders: 47
Market Capitalization as of August 30: $43.54 Billion
Atlassian (NASDAQ:TEAM) is a prominent player in the enterprise software market. The company develops collaboration software designed to enhance productivity and teamwork. Atlassian (NASDAQ:TEAM) is known for products such as Jira and Confluence which serve over 300,000 customers globally across various industries.
While Atlassian (NASDAQ:TEAM) has a robust revenue, its ongoing investments in R&D, transition to cloud services, reliance on third-party partners, and strategic focus on growth contribute to its improving profitability. For the financial year 2024, Atlassian (NASDAQ:TEAM) reported that its revenue increased 23% to $4.4 billion compared to the previous year. The company experienced an operating loss of $117.1 million, a significant improvement compared to the $345.2 million loss in the previous year. The company is in the midst of a significant transition from its legacy server products to cloud-based offerings, which currently account for about 60% of its total revenue. During the financial year 2024, Atlassian (NASDAQ:TEAM) released new product innovations such as Rovo, a unified Jira, and the Guard security and achieved the FedRAMP (Federal Risk and Authorization Management Program) “In Process” designation, which is security assessment, authorization, and continuous monitoring program by the United States for cloud products and services. The number of customers who spend more than $10,000 in annual recurring revenue for cloud, increased by 18% year-over-year to 45,000 customers Additionally, the number of customers spending over $1 million annually grew by 48%. The company’s focus on cloud-based solutions and strategic investments in AI are expected to drive continued expansion and higher net expansion rates.
Looking ahead, Atlassian (NASDAQ:TEAM) announced its goal to surpass $10 billion in annual revenue within the next five years. For fiscal year 2025, Atlassian (NASDAQ:TEAM) expects total revenue growth of approximately 16% year-over-year, with cloud revenue growth of around 23%, data center revenue growth of 20%, and other revenue growth of 5%. The company also projects a gross margin of about 83.5%, with an operating margin of approximately 21.5%.
The company’s cloud-first strategy is paying off, with cloud revenue now constituting 61% of its total revenue. This transition not only enhances customer lifetime value but also positions Atlassian (NASDAQ:TEAM) to capitalize on the growing demand for cloud-based solutions. The company’s $67 billion serviceable addressable market is growing at a CAGR of 12% and provides substantial room for further expansion. Atlassian’s (NASDAQ:TEAM) strong market position, innovative product portfolio, and efficient business model, the company is well-positioned to capitalize on the growing demand for digital workplace solutions and achieve its ambitious revenue targets. Atlassian (NASDAQ:TEAM) earnings are expected to grow by 7.2% this year. In the second quarter, Atlassian’s (NASDAQ:TEAM) stock was held by 47 hedge funds with stakes worth $2.18 billion. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $207.38, which represents a 22.4% upside potential from its current level.
While we acknowledge the potential of Atlassian (NASDAQ:TEAM) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than the stocks on our list but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure. None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and investors. Please subscribe to our daily free newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
