On Monday , Canaccord Genuity adjusted the stock price target for monday.com Ltd. (NASDAQ:MNDY (NASDAQ:MNDY)), decreasing it to $220 from the previous $250 while retaining a Buy rating on the stock. The adjustment follows a change in the stock's valuation over the past month, with the company now trading at a more reasonable price in terms of its expected 2024 revenue.
According to Canaccord, the reassessment of the stock price target is a reflection of the stock's current valuation, which is seen as more sensible and allows for a cash flow multiple that is deemed logical. The firm noted that monday.com was previously trading at a higher multiple of its anticipated 2024 revenue but has since become more attractively priced.
The analyst day held in December was highlighted as a positive event that showcased monday.com's potential for sustained growth and helped shape the perception of the company as a mid-market counterpart to ServiceNow (NYSE:NOW), rather than just another competitor in the crowded collaborative work management (CWM) space.
The comparison to HubSpot (NYSE:HUBS)'s significant market cap growth over four years has also fueled bullish sentiment for monday.com's future.
Despite management's recent guidance indicating growth towards the lower end of their targets for 2024, which pointed to a 28% increase this year, Canaccord views this as a conservative estimate. The firm remains optimistic about monday.com's ability to achieve low-30% growth this year.
The company's high gross margins and go-to-market model, which relies on adjustable performance-based marketing spend, provide flexibility in profitability and support the belief that monday.com can maintain a Rule of 50+ business, a metric indicating strong performance.
Canaccord's evaluation is based on the current valuation of monday.com at 8.7 times enterprise value to revenue (EV/R) and 40 times enterprise value to free cash flow (EV/FCF) based on estimated 2024 figures, with a Rule of 40 metric reaching 50% for the same period.
InvestingPro Insights
As monday.com (NASDAQ:MNDY) navigates through market fluctuations, real-time data from InvestingPro provides a nuanced perspective on the company's financial health and stock performance. The company's market capitalization stands at $8.71 billion, reflecting its significant presence in the market.
With a remarkable gross profit margin of 88.95% over the last twelve months as of Q1 2023, monday.com demonstrates its ability to maintain profitability at the core of its operations. Despite this, the company's P/E ratio remains negative at -4641.39, which signals that investors are anticipating future growth to justify the current share prices.
InvestingPro Tips highlight that monday.com holds more cash than debt on its balance sheet, providing financial stability and flexibility. Additionally, net income is expected to grow this year, which aligns with Canaccord Genuity's optimistic outlook for the company's potential to achieve low-30% growth.
With 14 analysts revising their earnings upwards for the upcoming period, the sentiment around monday.com's financial future appears to be strengthening. It's worth noting that the company is trading at a high revenue valuation multiple and a high Price / Book multiple of 10.71, which may suggest investor confidence in its growth prospects despite not being profitable over the last twelve months.
For investors seeking a comprehensive analysis and additional insights on monday.com, InvestingPro offers more tips that could guide investment decisions. To delve deeper into the potential of MNDY and access these valuable insights, investors can use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 12 additional InvestingPro Tips available, providing a broad spectrum of analysis and forecasts for monday.com's performance. Visit https://www.investing.com/pro/MNDY to explore these resources and make informed investment choices.
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