Here's Why I Won't Buy Atlassian Stock Even Though It's a Great Business
One of the technology sector's most esteemed stocks is workplace-management software company Atlassian (NASDAQ: TEAM). With a large market opportunity, high growth, enviable profit margins, and highly engaged founders, there's a lot to like about the business. However, even though the winds are blowing mightily on Atlassian's sails, there's ultimately one factor that I believe will be like an anchor on shareholder returns for the foreseeable future.
Atlassian stock started 2022 trading at a price-to-sales (P/S) valuation of 40, which is extremely high and implies the high level of confidence investors have in this company. Rising interest rates have caused valuations to contract and Atlassian's P/S ratio has consequently been cut in half. But a P/S ratio of 19 is still high and suggests investor sentiment remains bullish.
Atlassian's mission is to empower workplace collaboration from anywhere in the world. Both technical workers (think software developers, etc.) and non-technical workers (think marketing teams, etc.) use the company's products. This market is huge and management believes 2.2 million companies globally could ultimately benefit from Atlassian products.
Source Fool.com
