Why Atlassian Stock Dropped Today
Key Points
Guggenheim analyst Howard Ma just slashed his price target on Atlassian.
That's the bad news. The good news is Ma still expects Atlassian stock to double.
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Shares of workplace software company Atlassian Corporation (NASDAQ: TEAM), author of both Jira and Confluence, tumbled 6.3% through 10:45 a.m. ET Thursday.
Guggenheim analyst Howard Ma may be the reason.
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What Guggenheim says about Atlassian
Ma lowered his price target on Atlassian stock to $115 this morning, a near-40% cut in his valuation of the stock, as reported today on TheFly.com. That sounds bad, but it's worth noting that Atlassian stock currently trades below $60 a share. So while the price target was cut nearly in half, the analyst still predicts Atlassian shares could nearly double over the next 12 months.
And he still thinks Atlassian shares are a buy. He still believes Atlassian possesses a "deep technology moat ... that AI cannot easily replace."
What this means for Atlassian stock
So why cut the price target at all? Well, even if artificial intelligence doesn't disrupt Atlassian's business model entirely, it may still slow it down, limit its market share, or at least slow its expansion into that market as potential customers try AI before finally deciding to pay for Atlassian's software products.
That's the short-term threat. Long-term, however, Wall Street analysts generally agree that Atlassian has a long growth path ahead of it, and forecast 20% average annual earnings gains over the next five years. With the stock costing less than 13 times trailing free cash flow today, Atlassian stock looks cheap to me.
And today's share price decline could be a buying opportunity in disguise.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Atlassian. The Motley Fool has a disclosure policy.
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