Strong Start to Year for Atlassian; FVE up to $405

We are raising our fair value estimate to $405 per share from $303 for narrow-moat Atlassian based on strong first-quarter results and guidance causing us to raise our growth expectations and margin expansion trajectory for the longer term. With shares up 8% after hours, we view shares as skewing expensive, but we think continued quarterly strength would provide valuation support. Atlassian kicked off fiscal 2022 in style, including substantial upside to the high end of guidance for both revenue and non-IFRS EPS in the first quarter. Management also provided similarly strong guidance for revenue, while non-IFRS EPS was slightly below Factset consensus for the December quarter. In addition, the firm's cloud migration is gaining steam and ahead of the pace we had previously modeled. While the more rapid model transition is pressuring margins near-term, we remain bullish on Atlassian's ability to deliver strong financial results while increasing its business at an impressive pace. We view robust first-quarter results as reinforcing our view that Atlassian offers a broad set of easy to purchase, deploy, and use IT tools that can help customers innovate and cut costs.