User question: Anyone investing in Atlassian? They don’t have a Moat (slack is their biggest competitor) but I’ve heard it’s a good company and growing
Victor: Great eye! Thank you for asking and finding them…no doubt a very solid company!! I’ve looked at TEAM a while ago. Let’s walk through it briefly: They are doing really well and growing fast, relative to many other companies outside the SAAS space. They have over $1b in revenues, which shows traction and they are EBITDA profitable. They have a loyal customer base and a great chart. My challenge was (and still is) that while they are growing revenues at around 35%, ALL of my other companies exceed 60% revenue growth q/q. There was a time 10 years ago I would have killed to find companies growing 35%, but with ARR and other advantages of Digital cloud SAAS companies, combined with 80-90% margins…well, I compare them all and take the fastest horses I can find… I don’t think you’d do badly investing in TEAM (Atlassian), but I also note their upside could be limited at this point, as they are at a $33B market cap, which means they are valued at roughly 33 times their revenues of $1B. Thats higher than most of the stocks in my portfolio and with that $33B market cap, they will have a harder time getting to 5 times their size…compare that with AYX for example. I invested in AYX last year when it was less than a $1.5B market cap…in a little more than a year, they have grown to almost a $7B market cap and still have plenty of room to grow. They will still have a smaller market cap than TEAM if they quadruple from here. They are already what is called a 4 bagger for me…I invested around $25/share and AYX has grown more than 4x to $108/share. I don’t envision TEAM being able to 4x from here very easily as that would make them a $150B company…they could, of course, but that would make them SIGNIFICANTLY larger than the mothership “SalesForce.com” and many other much more profitable companies. Salesforce is already doing $14B (14x the revenue of TEAM) in revenues…an unlikely scenario. Combined with the competitors in the space, my 30,000 foot view is that TEAM is a very good company, IMHO, but my thumbnail analysis is that I have to pass on investing in it at this valuation, this growth rate and at this point, given my other horses in the race…😉.
For your reading leisure…whether you are an SAAS company investor or have your own small company, there are some great tid bits to mine from the attached company founders in the SAAS space…enjoy!!
https://www.bvp.com/atlas/10-laws-of-cloud
Great mention of MongoDB in this article….
Every day can’t be an “up” day. The portfolio on Thursday was up 25% for the MONTH of June, so I guess it warrants a little profit taking today…Wishing everyone an amazing summer!
