The opportunity arises in the collaborative work management space
monday.com (MNDY) has only been on public markets for a few weeks. In that short span of time, the stock price has already gained 50% over the IPO price, while Wall Street analysts rated the unicorn software developer. One of the latest to throw the hat off with a positive review is Needham’s Scott Berg.
âWe believe MNDY provides investors with exposure to a large end market with a leading supplier in the midst of its hyper-growth phase,â said the 5-star analyst. âWe find that MNDY differs from many other recent software IPOs where growth is already slowing. Our work in the industry suggests that MNDY is offering a differentiated, out-of-the-box Work OS product strategy and high-end S&M investments to capture new demand, and that corporate clients are starting to standardize on platforms like monday.com.
MNDY operates in what is called the collaborative work management segment. It is already a large market, but it is expected to grow further. Berg estimates that âat the bottom of the ladder,â his TAM (Total Addressable Market) consists of 400 million âglobal knowledge workersâ.
At the other end of the scale are the 750 million “global places that Microsoft’s Excel application currently enjoys.” Either way, up or down this represents a huge market opportunity which, among major competitors, Berg believes, that no one currently has more than 2-3% penetration. It is also a segment that has received a real boost from the pandemic as remote working practices have become mainstream 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 disproportionate 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 “reaches scale” and growth slows, the company 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 customers, with none generating more than 1% of total revenue, customers with more than $ 50,000 in ARR (annual recurring revenue) have increased at a rapid rate and Berg expects this figure to continue to grow in the years to come.
To that end, Berg launched MNDY stock hedging with a buy rating and a price target of $ 265. The implication for investors? Increase of 14%. (To look at Berg’s background, Click here)
Looking at the consensus breakdown, monday.com has a strong buy consensus score based on 8 buys vs. 2 takes. The average price target is $ 263.33, which suggests a 13% increase over one year. (See the stock analysis of monday.com on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the analyst presented. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.