Baird upgrades Atlassian on upside from platform shift and GenAI push

Investing.com -- Baird upgraded Atlassian (NASDAQ:TEAM) Corp to "Outperform" from "Neutral" on its strengthening platform strategy, growing momentum in generative AI, and an attractive valuation that offers nearly 30% upside from current levels.

Analysts are "incrementally” bullish on Atlassian’s enterprise ambitions and upgraded the stock with a $255 price target.

Atlassian is becoming a true platform, Baird wrote, on improved product consistency, a three-cloud approach, and positive customer feedback on the company's positioning in the commercial and enterprise segments.

The firm also pointed to new product bundles and the integration of Rovo, Atlassian’s generative AI assistant, into standard subscriptions at no extra cost.

The inclusion of Rovo was described as a meaningful catalyst for GenAI adoption among customers, and Baird noted that user feedback suggests the move is encouraging deeper platform engagement.

While some on Wall Street remain concerned about the potential erosion of Jira seats due to automation, Baird argued that the growing importance of developers and engineers in AI-driven workflows actually reinforces Atlassian’s strategic role.

The firm likened the moment to ServiceNow’s early success during the digital transformation era, when IT departments became more central to corporate strategy.

With FY'25 cloud revenue growth guidance of 26.5% year-over-year, Baird sees Atlassian on track for sustained more than 20% growth and improved margins, while still investing in go-to-market and product initiatives.

“Atlassian has never been an inexpensive stock,” Baird said but added that the current valuation, which is around 31x next-twelve-month FCF, is near the low end of its historical range.

For longer-duration investors, Baird believes the risk/reward is attractive.