Atlassian Stock: Great Software Company, But Grossly Overvalued (NASDAQ:TEAM)
Summary
To target this market Atlassian makes use of a direct go-to-market strategy that favors low-cost self-serve options over having a traditional enterprise sales force. When customers add at least one app or integration in Jira Software, for instance, dollar churn reduces by approximately half. There has been some operating leverage in general & administrative expenses, but sales & marketing and R&D have remained basically at the same percentage levels relative to revenue. Compared to a group of its peers which includes Adobe (ADBE), Salesforce (CRM), and Zoom (ZM) among others, Atlassian is by far the company that spends the most in R&D as a percentage of revenue. With a forward P/E still in the triple digits, a market cap that exceeds $50 billion, and an EV/Revenues multiple close to 20x, we believe it is better to avoid the shares despite the attractiveness of the underlying business.
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