Opportunity invites itself into the collaborative work management space
monday.com (MNDY) has only been on the public markets for a few weeks. In this short period, the stock price has already gained 50% on the IPO price, while Wall Street analysts have valued the unicorn software developer. One of the latest to toss the hat with a positive review is Needham’s. Scott Berg.
“We believe MNDY offers investors exposure to a broad end market with a leading vendor in the middle of its hyper-growth phase,” the 5-star analyst said. “We see that MNDY differs from many other recent software IPOs where growth is already slowing. Our industry work suggests that MNDY is offering a differentiated, out-of-the-box Work OS product strategy and high-end S&M investments aimed at capturing new demand, and that enterprise customers are beginning to standardize on platforms like monday.com.
MNDY operates in what is known as the collaborative work management segment. It’s already a big market, but it’s expected to grow even further. Berg estimates that “at the bottom of the scale,” his TAM (total addressable market) consists of 400 million “global knowledge workers.”
At the other end of the scale are the 750 million “global seats that Microsoft’s Excel application currently enjoys.” Either way, up or down, this represents a huge market opportunity, which among major competitors Berg believes no one currently holds more than a 2-3% penetration rate. It is also a segment that has received a real boost from the pandemic, as remote working practices have become commonplace and companies have turned to more collaborative applications to manage the workload.
Specifically, however, the company has grown faster than the competition over the past two years. Berg attributes the outsized growth to MNDY’s “out-of-the-box” product that requires no coding and creates “differentiation in an increasingly crowded space.”
The analyst also believes that as the operating model “climbs to scale” and growth slows, the business will become very profitable. It has already achieved a gross margin of 89.2% in 1Q21, placing it in the top five of all public SaaS companies. And while at the end of 1Q21, Monday had a diverse customer base of 127,942, with none generating more than 1% of total revenue, customers with more than $50,000 in ARR (annual recurring revenue) have been growing at a rapid rate and Berg expects this number to continue to grow in the coming years.
To that end, Berg initiated the MNDY stock hedge with a buy rating and price target of $265. The implication for investors? 14% increase. (To see Berg’s track record, Click here)
Looking at the consensus breakdown, monday.com has a Strong Buy consensus rating based on 8 Buys vs. 2 Takes. The average price target stands at $263.33, suggesting a 13% year-over-year upside. (See analysis of monday.com stock on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.