Atlassian (TEAM) stock price forms risky pattern ahead of earnings

By:
on Apr 22, 2024
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  • Atlassian’s stock has crashed by over 25.9% from its highest point this year.
  • The retreat accelerated after the company provided a weak revenue guidance.
  • The company will publish its financial results later this week.

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Atlassian (NASDAQ: TEAM) stock price has moved into a deep bear market as concerns about its growth continues. After peaking at $258.63 in January, the stock has plunged by over 25.9% and is now hovering near its lowest point in December last year.

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Atlassian earnings ahead

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This will be an important week for Atlassian, the parent company of Jira, Confluence, and Trello as the company seeks to reverse a collapse of its stock. It will publish its quarterly results on Thursday on the same day that Microsoft, Alphabet, and Intel will release their reports.

These results will come a few months after the company published strong numbers that came up short of estimates. Its revenue crossed the $1 billion level during its Q2, higher than the $872 million it made in the same quarter in 2022.

Atlassian’s free cash flow increased to over $284 million while its net income jumped from $114 million to $189 million in the three quarters to $189 million. Most of its revenue growth was in its data center segment. 

Atlassian’s forward guidance was lower than expected. The management expects that its total revenue will be between $1.085 million and $1.10 billion. The average estimate of analysts polled by Yahoo Finance is that its revenue will be $1.10 billion followed by $1.11 in the current quarter.

Still, Atlassian seems like it is still growing as more companies embrace cloud tools to manage their projects. It has grown its quarterly revenue from $100 million when it went public a decade ago to over $1 billion today. Its annual revenue is expected to jump to over $14 billion this year followed by $15 billion in 2025.

The number of customers have also been growing and now stands at over 300k. Some of this growth has come through acquisitions. It bought Trello in 2017 and Loom in 2023. 

There are two big challenges that Atlassian investors should be aware of. First, Atlassian’s growth has come at a great cost as its total net loss has totalled over $2.5 billion in the past five years. 

Second, Atlassian’s insiders, including its co-CEOs have been actively selling shares. They have sold over 1 million shares in the past three months and 4.2 million in the past 12 months.

Atlassian stock price forecast

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Atlassian stock

TEAM chart by TradingView

The daily chart shows that the TEAM share price peaked at $258.55 in January and has dropped by over 25% to the current $191. It is sitting at a crucial level at $189.50, its lowest swing in March this year.

The stock is about to form a death cross pattern where the 50-day and 200-day Simple Moving Averages (SMA) intersect. Also, the MACD indicator has moved below the neutral point. 

Therefore, the outlook for the Atlassian stock price will likely continue falling after it publishes its financial results. If this happens, the stock will likely drop and retest the support at $165.81, its lowest swing in November last year.

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