On Monday , UBS updated its stance on monday.com Ltd. (NASDAQ:MNDY (NASDAQ:MNDY)), increasing the price target to $240 from the previous $220 while keeping a Neutral rating on the stock.
The adjustment followed a solid performance report from the company, which showed a 3% revenue beat, consistent dollar-based net retention (DBNR) of 110%, and a record 41% free cash flow (FCF) margin. Additionally, monday.com raised its full-year 2024 revenue guidance excluding price increases.
The company, which specializes in Work Management software, reported strong performance in this area and indicated that trends at the beginning of the second quarter are similar to those observed previously.
Despite a general downturn in sentiment among small and medium-sized business (SMB) software companies throughout the quarter, monday.com's results stood out positively.
Investors have been particularly focused on the level of pricing uplift in the company's results. While monday.com has not quantified the first-quarter impact, UBS suggests it could be around $4 million, implying a growth rate in the low-30s percentage range when excluding price, a slight deceleration from the previous quarter but still strong relative to the sector.
Looking forward, UBS anticipates that if monday.com continues to outperform revenue expectations by a typical 4 percentage points, second-quarter revenue growth could accelerate to 35% year-over-year.
This projection includes an assumed $6-8 million contribution from pricing changes, which would maintain growth excluding price in the low-30s percentage range.
The firm is intrigued by the potential support from the company's ramp-up in customer relationship management (CRM) offerings, which could add approximately 3 percentage points to year-over-year growth in calendar year 2024.
However, UBS is looking for more evidence that the broader softness among SMBs is stabilizing or that monday.com can sustain its performance despite the challenging environment.
InvestingPro Insights
With monday.com Ltd. (NASDAQ:MNDY) showcasing a robust financial performance, it's essential to delve into the granular data that could influence investor sentiment. According to real-time metrics from InvestingPro, monday.com's market capitalization stands at a substantial $10.8 billion. The company's impressive gross profit margin, reported for the last twelve months as of Q4 2023, is 88.95%, underscoring the efficiency of its business model. Furthermore, the revenue growth for the same period is a notable 40.59%, reflecting the company's strong market expansion.
InvestingPro Tips reveal that monday.com holds more cash than debt on its balance sheet, which is a reassuring sign for investors concerned about financial stability. Additionally, analysts predict the company will be profitable this year, which could be a pivotal turning point for monday.com's financial narrative. Notably, the company has also seen a significant return over the last week, with a 21.94% price total return, hinting at a positive market reception to recent developments.
For investors seeking further guidance, there are additional InvestingPro Tips available for monday.com, which can be found at https://www.investing.com/pro/MNDY. These insights can provide a deeper understanding of the company's financial health and growth prospects. Moreover, users can take advantage of a special offer using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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