What happened

Shares of cloud computing software company Atlassian (TEAM -0.75%) slid 3.8% in mid-afternoon trading on Monday at 3 p.m. ET.

You can probably blame British banker Barclays for that.  

So what

In an unusual weekend move, Barclays cut its price target on Atlassian stock by 16% on Sunday to $130 per share -- "$130 per share" being perhaps not coincidentally almost the exact share price that Atlassian finds itself at today.

Barclays pointed to last week's third-quarter earnings report to justify its move, which is curious because Atlassian actually beat on earnings last week, reporting a $0.54 per-share profit where Wall Street had expected only $0.34, and reporting better-than-expected revenue as well, up 24% year over year. However, Atlassian guided to a Q4 revenue range of only $900 million to $920 million, which at its midpoint appeared to imply the company will miss analyst expectations for $919.5 million in Q4 revenue.  

Barclays complained both about the weaker-than-expected guidance and also the fact that the company's revenue beat in Q3 wasn't as big as it would have liked to have seen.

Now what

And I suppose that's a fair critique.

Atlassian isn't profitable after all. Indeed, it hasn't reported a profit since 2016. The company does generate substantial free cash flow -- $825 million over the past 12 months. Still, that works out to a pricey 42 times trailing free cash flow for the stock. Given the absence of generally accepted accounting principles (GAAP) profits and the pricey price-to-free-cash-flow (P/FCF) ratio, investors can be forgiven for wanting to see steady improvement in sales growth to offset the stock's questionable valuation.

According to analysts polled by S&P Global Market Intelligence, mind you, Atlassian will deliver strong growth going forward. Analysts on average see profits growing at a truly mind-boggling 74.5% annualized rate over the next five years. But with sales up only 24% last quarter, and perhaps another 26% to 28% this coming quarter, Atlassian doesn't appear to be living up to that promise of late.  

Given the expensive valuation, perhaps investors -- and Barclays -- are right to be cautious.