Market teams up to sell Atlassian (get it?)
Atlassian Corp PLC (NASDAQ: TEAM) is watching its stock plunge over 10% this morning following the release of its Q3 2018 earnings results after the market closed yesterday. Here’s a quick look at what the company accomplished in the quarter compared with the same quarter a year ago:
|Metric||Q3 2018||Q3 2017||Change|
|Revenue||$223.72 million||$159.91 million||39.9%|
|Non-IFRS operating income||$38.37 million||$24.49 million||56.6%|
|Non-IFRS net income||$24.59 million||$18.93 million||29.9%|
|Non-IFRS diluted earnings per share (EPS)||$0.10||$0.08||25.0%|
|Free cash flow||$86.38 million||$68.30 million||26.5%|
Atlassian beat analysts’ expectations on both the top and bottom lines, which called for revenue of $218 million and non-IFRS diluted EPS of $0.08, equating to an all-around great quarter for the company.
However, the sentiment turned negative when Atlassian provided its outlook on the fourth quarter; the company stated that it expects revenue in the range of $232 million-$234 million, which surpassed analysts’ expectations of $231 million, but it expects non-IFRS diluted EPS of approximately $0.12, which came up short of the $0.14 estimate of analysts.
It was a great quarter overall for Atlassian, and its full-year outlook calls for significant growth compared to 2017, so I think the sell-off more than 10% based on its Q4 outlook may be overdone, especially when you consider that Atlassian is known for under-promising and over-delivering (it projected revenue of $217 million-$219 million and non-IFRS EPS of approximately $0.08 for the third quarter, which it just exceeded by a wide margin). But remember that small, fast growing companies sometimes are off on their investment timing by a quarter or two and end up with a profit shortfall. Keep an eye on this fast grower, a rebound may not be far off.