What's In The Cards For Atlassian (TEAM) In Q1 Earnings?

Atlassian Corporation Plc (NASDAQ:TEAM) is set to report first-quarter fiscal 2017 results on Oct 27. Last quarter, the company posted a positive earnings surprise of 83.33%. Let’s see how things are shaping up for this announcement.

Factors at Play

Atlassian is engaged in designing, developing, licensing and maintenance of software and the provisioning of software hosting services. It offers tools for software developers consisting of FishEye, Bamboo and SourceTree.

We consider that the company’s latest acquisition of StatusPage will positively impact its results in the to-be-reported quarter. Atlassian acquired this tiny startup business in July this year, which has developed a product that allows Internet companies to keep their users updated about the status of their online services.

Per Atlassian, over one thousand Internet companies including Citrix and Twilio used StatusPage’s services. The acquisition will not only broaden Atlassian’s product offerings but will also enhance its client base, thereby boosting its top- and bottom-line performance. We anticipate benefits of the acquisition to be reflected in the results of the to-be reported quarter.

Furthermore, we believe that continuous investments in product development (mainly the launch of three purpose-built versions of JIRA products) and a significant number of customers on an active subscription or maintenance agreement are a few of the positives, which may drive first quarter results.

Moreover, for the to-be reported quarter, the company expects total revenue in the range of $132 million and $134 million.

Nonetheless, a volatile spending atmosphere and competition from other privately held players in the space such as Dynport and PBworks remain concerns.

Earnings Whispers

Our proven model does not conclusively show that Atlassian is likely to beat the Zacks Consensus Estimate in its upcoming release. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: The Earnings ESP for Atlassian is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 4cents per share. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: Atlassian has a Zacks Rank #3. Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

ATLASSIAN CP-A Price and EPS Surprise

Stocks to Consider

Here are some stocks which, as per our model, have the right combination of elements to post an earnings beat this quarter:

Inovalon Holdings, Inc. (NASDAQ:INOV) , with an Earnings ESP of +50.00% and a Zacks Rank #1.You can see the complete list of today’s Zacks #1 Rank stocks here.

MakeMyTrip Ltd. (NASDAQ:MMYT) , with Earnings ESP of +4.11% and a Zacks Rank #1.

SITO Mobile, Ltd. (NASDAQ:SITO) with Earnings ESP of +100.0% and a Zacks Rank #1.

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