Midweek musings and a Tech Stock
to the tune of Gen-Z Boss & a mini
Hello traders,
What a week it has been in the markets so far. Our swing ideas largely worked well and hence we are calling it a week here.
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For remainder of the week and through the weekend the only thing we will be focusing on is how the crude oil market reacts to the closure of the Strait of Hormuz and if this administration blinks.
The bottom line is that President Trump cares about the markets more than I care about my sharpe ratio. We should ideally see de-escalation in the middle east sooner rather than later.
In this regard, I’m warming up to the idea of buying software here.
Atlassian Corp TEAM 0.00%↑
Thesis pillars
1. Revenue
Even with the AI hoopla, TEAM revenues are climbing steadily and I don’t see that changing anytime soon. Vibe-coding JIRA is not something I would bet any significant amount on.
2. Margins
TEAM reported a non-GAAP operating margin of 27%. That is A-OK in my book. A large company with mature R&D and stable clients, this is something I wouldn’t call a red flag at all.
3. RSU reset
The stock has taken a beating and the RSU grants from 2020-21 era are now fully vested and/or reset. This is an excellent sign as the SWE market has now reset.
4. Engineer market reset
The hiring market has changed a lot. Signing bonuses have gone away, competing offers are rare, and the wave of layoffs across big tech in the last couple years have made talent easy to find and with a much lower ego(FAANG OR GTFO DOES NOT FLY ANYMORE). That gives $TEAM a chance to hire excellent people at compensation levels the same people would laugh at two years ago. Bonus, you can get them in-office and crank up the productivity that way.
Overall, this makes TEAM an excellent play to buy and hold for 3+ years.
Tail risks to monitor
A slowdown in enterprise spending would delay the revenue ramp and push out the re-rating.
Competitive pricing pressure from hyperscalers could squeeze gross margins before operating leverage shows up.
A broader macro selloff could compress software multiples across the board, meaning 25x falls to 15x even if company fundamentals stay intact.
I have been off X this week and hence you all probably missed the intra-day commentary, however the discord is plenty active, sharing a snippet below.
I really wanted to share the Friendship over meme on X but I stopped myself from doing so.
That is about it from me.
-Fin
P.S. Next week’s market outlook would come out on Monday instead of a Sunday.