Jira operator Atlassian's stock gains as Morgan Stanley promotes it to Top Pick

Investing.com -- Atlassian (NASDAQ:TEAM ) Corporation, the company behind popular tools like Jira and Confluence, saw its stock rise around 0.9% premarket Friday after Morgan Stanley upgraded it to their Top Pick.

The upgrade comes despite recent concerns over Atlassian's FY25 guidance, which initially spurred investor worries, creating what Morgan Stanley sees as a compelling entry point for long-term investors.

Morgan Stanley highlighted Atlassian's potential for a return to 20%+ revenue growth, supported by its expanding product portfolio and pricing power.

According to Morgan Stanley analysts, this growth trajectory is achievable with "~25% Cloud growth and ~16% Data Center growth," setting Atlassian up for success over the next few years.

Atlassian is also expected to see improved cross-sell and upsell opportunities as well as better net revenue retention rates.

The investment bank's note mentions that the company recently pushed through cloud price increases in September and anticipates more increases in its Data Center offerings by January 2025.

Morgan Stanley remains confident in Atlassian's ability to leverage these pricing moves, saying it will help support future growth.

"We view a very attractive risk-reward setup for a unique software asset poised for sustained 20% growth," the bank declared.

They emphasized Atlassian's leadership in several key markets and its ongoing success with migrating customers from Data Center to Cloud, framing this as the backbone of its future performance.

Morgan Stanley also raised its price target for Atlassian from $216 to $224, driven by Atlassian's strong fundamentals and the potential for 25%+ free cash flow growth.

Source: Investing.com