Should You Add Atlassian Corporation Plc (TEAM) to Your Portfolio?
November 24, 2022
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Baron Funds, an investment management company, released its “Baron Fifth Avenue Growth Fund” third quarter 2022 investor letter. A copy of the same can be downloaded here. In the third quarter, the fund declined 2.9% (Institutional Shares) compared to a 3.6% decline for the Russell 1000 Growth Index and a 4.9% decline for the S&P 500 Index. Holdings in Consumer Discretionary and Communication sectors contributed significantly to the fund’s performance in the quarter. In addition, please check the fund’s top five holdings to know its best picks in 2022.
Baron Funds highlighted stocks like Atlassian Corporation Plc (NASDAQ:TEAM) in its Q3 2022 investor letter. Headquartered in Sydney, Australia, Atlassian Corporation Plc (NASDAQ:TEAM) is a software product development company. On November 22, 2022, Atlassian Corporation Plc (NASDAQ:TEAM) stock closed at $116.34 per share. One-month return of Atlassian Corporation Plc (NASDAQ:TEAM) was -43.54% and its shares lost 70.13% of their value over the last 52 weeks. Atlassian Corporation Plc (NASDAQ:TEAM) has a market capitalization of $29.727 billion.
Baron Funds made the following comment about Atlassian Corporation Plc (NASDAQ:TEAM) in its Q3 2022 investor letter:
“In the third quarter, we initiated a new position in Atlassian Corporation Plc (NASDAQ:TEAM), a software company that provides solutions for designing, developing, and maintaining software, including JIRA for team planning and project management, Confluence for team content creation and sharing, Bitbucket for code sharing and management, and JIRA Service Desk for IT services and support applications. Over the years, JIRA has become the industry standard for developer collaboration tools, which has driven Atlassian to benefit from durable growth, compounding revenues over 30% for nine consecutive years with free cash flows compounding at higher rates. Atlassian’s opportunity is underpinned by three large markets (DevOps, IT service management, and Work Management) with product leadership in each area, and a disruptive go-to-market model. Atlassian’s products are easy to use and are still primarily purchased online via a highly efficient self-service model, driving attractive unit economics with substantially lower-than-industry Sales and Marketing spend at approximately 15% of revenues (versus 30% to 40% for peers), enabling it to invest more in R&D and powering disruptive pricing dynamics (where customers get similar or better functionality for a much lower price)
Additionally, Atlassian began its business model shift to the cloud in earnest in fiscal year 2020 which has driven accelerating subscription growth of over 50% for the last five quarters (with only about 10 points of growth due to cloud migrations). The model transition is expected to mature in fiscal year 2024, which should unlock smoother long-term cross selling and up selling activity, opening an opportunity to drive up average customer spending by six to eight times over time. While seat expansion remains the most important revenue growth driver in the near term, the recently introduced Enterprise and Premium offerings, priced at a one and a half to three times compared to the standard package, are also starting to contribute, and are expected become even more prominent with the cloud transition…” (Click here to read the full text)
Atlassian Corporation Plc (NASDAQ:TEAM) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 58 hedge fund portfolios held Atlassian Corporation Plc (NASDAQ:TEAM) at the end of the third quarter, which was 66 in the previous quarter.
We discussed Atlassian Corporation Plc (NASDAQ:TEAM) in another article and shared Artisan Partners’ views on the company. In addition, please check out our hedge fund investor letters Q3 2022 page for more investor letters from hedge funds and other leading investors.
Disclosure: None. This article is originally published at Insider Monkey.