On a potential upward trajectory for Monday.com's shares, given the significant surge of 25,000 new customer relationship management (CRM) accounts.
There's a possibility for investors to earn profits by purchasing shares in Monday.com, a company providing project management software and other solutions.
Project management software, being a part of a $100 billion market, with an annual growth rate of 14%, as revealed in Monday.com's Q3 2024 shareholder letter, aids companies in keeping their projects on track.
Regrettably, despite surpassing three competitor companies' growth rates, Monday.com's stock has noticed a drop of 28% since reporting its impressive third quarter 2024 earnings, as mentioned by Yahoo! Finance.
Following my interviews with an initial Monday.com investor, Avi Eyal, Managing Partner at Entrée Capital, and Monday.com's co-founder and CEO, Roy Mann, here are three reasons that could result in Monday.com's stock price rise:
- Impressive third quarter results and prospects.
- Substantial total addressable market opportunity.
- Robust customer growth due to new CRM offering.
As Eyal shared with me during our December 19 discussion, "Monday.com is still a young company in a vast growth market, at the beginning of its journey. There is so much opportunity. We have a strong customer base with a solid initial product that can be leveraged."
Monday.com's Impressive Third Quarter Results And Prospects
Monday.com, founded in 2014, named after the initial day of the workweek, showcased outstanding performance in its third quarter.
The firm surpassed expectations and improved its forecast in Q3. Monday.com's third quarter revenue surpassed analysts' estimates by 1.9%, expanding by approximately 33% to $251 million, as Yahoo! Finance reported. Additionally, Monday.com's earnings per share of 22 cents also surpassed expectations, SeekingAlpha noted.
Monday.com also enhanced its revenue forecast for the year above analyst estimates. Specifically, the company anticipates a 32% increase in revenue to $965 million for 2024, approximately $7 million more than previous projections, as Globes revealed.
Furthermore, Monday.com increased its free cash flow estimate. As Globes stated, the firm expects a free cash flow of $287.5 million for 2024, $5 million more than the preceding projection.
Finally, Monday.com surpassed analysts' earnings before taxes, interest, depreciation, and amortization estimates and reported a significant improvement in its net revenue retention rate, according to Yahoo! Finance.
Monday.com envisions a bright future. As Monday.com CFO Eliran Glazer stated, "We are very pleased with our results in Q3, with solid revenue growth and profitability, as well as improving retention trends as we expand to larger customers."
Indeed, Monday.com's retention rate consistently surpasses 100% – meaning the company sells more to current clients. The firm achieves this by offering its software to single departments within a company and allowing them to share their excitement with other departments, enabling organic growth, as CTECH noted.
Monday.com's Substantial Total Addressable Market
Monday.com detects significant growth potential. The firm estimates its TAM growing at 14% annually to surpass $100 billion across four markets: "work management, CRM, service management and software development," according to Monday.com's Q3 shareholder letter.
The firm has grown significantly in the last decade, based on the following fundamental principle: create software that encourages collaborative work. Mann, co-founder of the company with Eran Zinman, shares a passion for crafting user-friendly software. "When we started, myself, and Eran needed to code to obtain the tools we required for working. We aimed to change the way people manage work together, creating an experience that is enjoyable, simple, and fun," Mann explained to me in a December 19 interview.
Entrée Capital was captivated by the platform and chose to invest in the company at an early stage. "Roy and Eran solved the risk management challenges I dismantled in a company I sold. They built a flexible architecture for risk management that would adapt to various industries," Eyal said.
Monday.com's architecture has captivated 250,000 customers in 200 different industries worldwide. "We have 80,000 users collaborating on a single platform," Mann shared.
"People utilize our software across a wide range of industries, including airplane manufacturing, clinical trials research, church events, media production – including Lionsgate, Channel 4, Universal Group, and Bauer Media Group – and various business functions such as marketing, research and development, and finance," he added.
Rapid Customer Growth From Monday.com's New CRM Product
Monday.com achieved a significant milestone in the third quarter – reaching $1 billion in annual recurring revenue. The company views this as an excellent starting point for future growth by expanding its product range and increasing its international presence.
A recent example of capitalizing on new products is Monday.com's CRM product, which has brought in 25,000 clients within two years of its introduction. "We occupy a sweet spot in CRM," Mann stated.
"Salesforce's product is inflexible, unable to handle various tasks, and expensive due to the need for hiring an implementation partner. Furthermore, there are numerous smaller competitors. We bridge the gap by providing an easy-to-use, customizable platform at an affordable price, ideal for sales teams."
Monday.com's culture serves as a potential competitive advantage over competitors. "We focus on hiring talented individuals with a humble attitude, a no-nonsense approach, and a passion for the business. We foster an environment where individuals collaborate and strive to serve their communities," Mann explained.
Is it worth buying Monday.com stock given its current situation? The argument for purchasing stems from the disparity between Monday.com's stock price performance since the release of its Q3 results and its financial performance.
Three other project management software companies, Atlassian, Smartsheet, and Asana, saw their stocks perform better after their Q3 reports than Monday.com. As a collective, these four companies surpassed analysts' revenue estimates by 1.9% and maintained their revenue guidance for the next quarter, leading to an average increase of 13.5% in their stock prices, according to Yahoo! Finance.
Despite posting the fastest revenue growth and raising their full-year revenue guidance the most among the group, Monday.com's stock price has dropped by 28% since the release of its Q3 report, as reported by Yahoo! Finance.
In the long term, Monday.com anticipates a 10-fold increase in revenues. "Competitors have reached $10 billion, and we believe we have everything needed to get there," Zinman stated to CTECH.
Given the predictions of 21 Wall Street analysts, Monday.com's stock would need to climb approximately 39% to reach the average price target of $324 per share, according to TipRanks.
Although this suggests a bullish outlook, the short interest in Monday.com's stock has increased by 1.2% in the past month, reaching 7.21%, as reported by the Wall Street Journal.
If those betting against the company's stock are incorrect, the TipRanks price target may be too low.
Based on the text, here are two sentences that contain the words 'money' and 'markets':
- Given the predictions of 21 Wall Street analysts, Monday.com's stock would need to climb approximately 39% to reach the average price target of $324 per share, according to TipRanks.
- Despite surpassing three competitor companies' growth rates, Monday.com's stock has noticed a drop of 28% since reporting its impressive third quarter 2024 earnings, as mentioned by Yahoo! Finance.
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