Atlassian stock jumps as CEO buys the dip after earnings: What's next?

Atlassian stock has staged a strong comeback, helped by its encouraging earnings report. TEAM jumped by 33% in extended hours, forming its biggest gap in years, reaching its highest level since January. It has jumped by 157% from its lowest level this year, with its market capitalization hitting $27 billion.

Atlassian stock jumps after strong earnings despite SaaSpocalypse concerns

TEAM stock has been under pressure in the past few years as insider sales coincided with the ongoing SaaSpocalypse concerns. 

The company eased these concerns after reporting strong financial results that showed its business continued to grow in the last quarter.

Its revenue jumped by 28% in the fourth fiscal quarter to $1.38 billion, signaling that demand for its products remains elevated. 

Also, its operating income jumped to $211 million, a big reversal from the operating loss of $28 million it made in the same period last year. Also, its net profit jumped to $139 million.

This growth capped a relatively strong year for the company, with the annual revenue hitting $6.5 billion, a 26% increase. The management noted that the AI theme was actually benefiting its operations. In a statement, James Chuong, the CFO said:

“Enterprises view Atlassian as a long-term, strategic partner and are deepening their commitment to our open platform to securely deploy agents across their organizations with the unmatched context of the Teamwork Graph.”

The management believes that the company has more room to grow in the near term. It expects that its first quarter revenue will be between $1.7 billion and $1.71 billion, higher than what analysts were expecting. Its cloud revenue will grow by 28.5% and will be offset by its data center business. 

Most importantly, the company’s CEO announced that he will start buying the stock. He plans to make open market purchases of about $250 million. It is common for stocks to rebound whenever key insiders are buying the dip. 

The purchases are a sign that the company is still highly undervalued. It trades at a forward price-to-earnings ratio of 20, much lower than the technology-sector median of 24. It is also lower than its five-year average of 93.

The company also has an attractive rule-of-40 metric. Using its forward estimates, the company expects its annual revenue in the new fiscal year to be about 13%, with the non-GAAP operating margin rising to 36%. This gives it a metric of 49%.

TEAM stock price technical analysis

Atlassian stock chart | Source: TradingView

The daily chart reveals that the Atlassian stock price bottomed at $55.97 in April this year. It then started bouncing back, ending the day at $110 on August 6. It then made a strong surge to $144.52 after its earnings report. 

Atlassian has now soared above the key resistance level of $119.27, its highest level on June 1 this year. It has now jumped above the 50-day and 200-day moving averages and is about to form a golden cross pattern. 

The stock has moved above the Weak, Stop & Reversal of the Murrey Math Lines. As such, there is a likelihood that the stock will likely continue rising, potentially to the extreme overshoot level of $175.