Key insights
- A bullish analyst opinion suggests Atlassian could reach a $100bn valuation in 2 years based on continued cloud revenue growth, margin improvement, and stable operating costs. The analysis draws a comparison to ServiceNow's valuation and operating profit, implying potential upside if SaaS sentiment improves. This presents a moderately bullish signal for Atlassian's stock.
So earlier last month I made a post about Atlassian being one of the final AI winners,
https://www.reddit.com/r/stocks/comments/1ryn4sf/atlassian_will_be_the_final_ai_winner/
Naturally, as it was a fairly contrarian take, I was mostly derided for it. But since that post, Atlassian has recovered a reasonable amount and earnings show that things are actually proceeding as I had speculated.
I think based on just current market valuations for Atlassian, we could potentially see a 5x return on existing stock prices, and reaching a potentially $100bn valuation in 2 years. Naturally I own the stock, so take note my opinion may be biased.
This may seem unreasonable to most, but if you extrapolate the financials there is a real possibility that this happens (over 50% chance). If we simply keep cloud revenue growth constant at 25%, achieve a 1-2% gross margin improvement (due to shift to cloud) and keep operating costs constant, Atlassian could see over $2bn in operating profit in 2028, which is more than enough to justify a $100bn valuation by current depressed SaaS standards.
FYI serviceNow has $2bn in operating profit with a $90bn valuation (and likely slower growth).
If saas sentiment improves (which I believe is probable), then this has potentially to surge even higher (maybe $150bn?). You can see my other post on that -
https://www.reddit.com/r/stocks/comments/1rynxom/contrarian_take_legacy_enterprise_saas_will/
All in all, I think this is one of the best risk-reward plays on the market at this current point in time.