Cloud services have become big business as more companies in the world turn to digital technology for the day to day running of their businesses. Companies that provide cloud services are becoming increasingly valuable as the services they offer become more central to the running of several industries.
Atlassian (TEAM) is one of the leading cloud service providers in the world. The cloud services provider is looking towards accelerating the expansion of its cloud business, and investors are hoping that its expansion will help the company perform even better at the top of the line. The company’s stock is currently trading at 20 times its estimated forward revenue, and this means Atlassian cannot affirm any mistakes in their quest to expound their business.
Strength and growth on the market
The cloud business has been performing well in the markets this year, and investors have reaped some benefits from how it has performed. Although Atlassian’s shares have retreated by 10% since late July, the shares are still up by 51% in 2019. In 2018, the shares gained 95%, and this shows how much the company’s performance on the market in the past two years has been strong. Companies such as Atlassian turn investors from forex trading as their shares offer higher returns.
Positive reviews on Wall Street have helped Atlassian in its quest to continue growing in its market share value. In June 2018, it was estimated that Atlassian would grow by 31.5% at the midpoint. The firm surpassed this estimate and grew by 37.3%. Going into the next financial year, the company expects a 27.9% growth at the midpoint due to the expansion of their cloud services.
Business and offerings for clients
The company has over 10 million active monthly users on its cloud, and their subscriptions revenue rose by 50% to $180.9 million. This makes up 54% of the total income earned by Atlassian. The company has been in business for over ten years, and besides cloud services, they offer a variety of other platforms.
Atlassian aims to have all the clients who use its on-premise platform join its cloud service. To ensure that this transition to cloud services is made easier, the company has optimized the pricing and packaging of the cloud services it provides. The company’s clients will now be offered free on-prem accounts which will go hand in hand with a free trial program for cloud services. Enterprise customers have the option to access the company’s premium cloud tier.
Going into FY’20, Atlassian plans on having a 40% subscription revenue growth. Based on the current demand for cloud services, that mark could be easy to reach for the company. It would not be much of a surprise to see Atlassian continuously beat its quarterly targets. The company will need subscription revenue to continue to go up to ensure that their investors are kept happy.
Growth of other services
Atlassian has a few product offerings that are growing and will contribute to the growth of the company’s revenue and share value. There is an increasing demand for the Opsgenie IT alerting service, and the product is experiencing rapid growth going into FY’20. Atlassian also purchased Trello in 2017 and the project management tool is growing in popularity. If Atlassian invests more into Trello, the product could provide major benefits to the company and its investors.
