William Blair stays positive on monday.com stock as Q2 results outperform consensus
On Tuesday, William Blair maintained an Outperform rating on monday.com Ltd. (NASDAQ: MNDY (NASDAQ:)), following the company’s second-quarter earnings report which surpassed consensus estimates.
The report highlighted a 34% increase in top-line growth, outperforming expectations by nearly 400 basis points and marking a reacceleration from the growth levels of the previous quarter. This performance was further bolstered by the company’s largest expansion deal to date, involving 80,000 seats.
The company’s execution has been notably strong despite a variable macroeconomic environment, with significant customer additions and the rapid adoption of new products. Notably, Monday CRM and Dev have seen substantial customer growth, with CRM reaching nearly 21,000 customers, a 150% increase, and Dev surpassing 2,700 customers, a 248% growth. The upcoming Monday Service, which is currently in beta, is also showing positive early trends and is anticipated to launch by the end of 2024.
The firm’s growth is partly attributed to its platform and go-to-market investments, which have allowed it to capture more upmarket customers. This is reflected in the 49% and 43% growth in customers with $100,000 and $50,000 in annual recurring revenue (ARR), respectively. Furthermore, the release of the second version of its DB platform infrastructure has significantly increased scalability, accommodating more enterprise use-cases.
Management’s recent pricing adjustments have also been well-received by customers, trending above expectations and contributing to a record gross retention rate. The company forecasts a $25 million benefit in 2024 and between $75 million and $80 million by 2026 from these changes. Customer discussions have increasingly focused on return on investment rather than pricing, which aligns with the company’s strategy to leverage the platform consolidation opportunity.
In conclusion, the analyst believes that the recent quarter’s results reinforce the view that monday.com is well-positioned for long-term success in the work management and collaboration category and is on track to become a robust enterprise-grade platform. This is supported by strategic investments in scalability, artificial intelligence features, and the expansion of its application offerings.
In other recent news, monday.com Ltd. has made significant strides in its financial performance, with a 34% increase in second-quarter revenue and a record GAAP profitability. The company has also secured an 80,000-seat agreement with a global healthcare company, marking a notable achievement. This led to an upward revision of the full-year revenue growth forecast to 31-32% year-over-year.
Analysts from Baird, Canaccord Genuity, JPMorgan, Goldman Sachs, DA Davidson, and TD Cowen have responded favorably to these results, raising their respective price targets for the company. These adjustments reflect monday.com’s consistent financial performance and the analysts’ confidence in its growth trajectory.
The company has also launched new product features, such as MondayDB 2.0 and Monday CRM, which are expected to contribute to monday.com’s positive outlook for the upcoming quarters. The projected full-year revenue for fiscal year 2024 is expected to be between $956 million and $961 million, suggesting a continuation of the current growth trend.
InvestingPro Insights
Following William Blair’s optimistic outlook on monday.com Ltd. (NASDAQ: MNDY), InvestingPro data provides additional context to the company’s financial health and market performance. With a market capitalization of $12.89 billion, monday.com stands as a significant player in the work management space. The company’s impressive gross profit margin of 88.9% in the last twelve months as of Q1 2024, underscores its ability to maintain profitability despite its rapid growth and expansion efforts. Additionally, the revenue growth of 36.94% during the same period suggests that monday.com is not only attracting new customers but also effectively monetizing its offerings.
InvestingPro Tips highlight key factors that investors may consider. The company holds more cash than debt on its balance sheet, providing financial stability and flexibility. Moreover, analysts have revised their earnings upwards for the upcoming period, reflecting confidence in monday.com’s future performance. It’s also noteworthy that the company’s stock has seen a significant return over the last week, with a price total return of 24.1%. For those interested in further analysis, there are 15 additional InvestingPro Tips on monday.com available at https://www.investing.com/pro/MNDY, offering deeper insights into the company’s valuation and market trends.
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