What happened
Shares of Atlassian (TEAM 1.65%) fell hard on Friday, down 4.3% as of noon ET after the workflow management software company held an investor day on Thursday.
Analysts weren't uniformly impressed with what Atlassian had to say. On the one hand, investment bank Citigroup called the company's prospects "significant" and reiterated its buy rating and $435 price target on the stock. On the other, Piper Sandler lowered its price target (to $384), while Cowen & Co. called the investor day revelations "relatively in line with expectations" -- and maintained a $330 price target and neutral rating on the stock.
Image source: Getty Images.
So what
But what did Atlassian say, specifically?
Reviewing the company's PowerPoint presentation, it seems it sees its total addressable market for software products as worth about $29 billion today, but growing to $176 billion by 2025. The company also seems to be gaining market share, noting that as the market at large is growing 11% per year, its own addressable market is growing at 14%.
And of course, with Atlassian doing barely $2.4 billion in business last year, this all implies a lot of growth ahead for the company.
Now what
That being said, I'm honestly not sure how the company is working its math. If its market is growing from $29 billion to $176 billion by 2025, well, that's sixfold growth over three years -- much faster than 14% growth. If other investors are similarly confused about the math, that might explain some of Atlassian's stock price weakness today.
Additionally, Yahoo! Finance figures show analysts projecting 20% long-term earnings growth for Atlassian. But if the company itself is predicting something more along the lines of 14% growth -- well, that too might be a factor that's spooking investors.
Long story short, Atlassian's problem today appears to be less about the company's growth prospects (which seem impressive) and more about its failure to clearly communicate its message.
