MNDY - monday.com: Time To Exercise Caution Despite Strong Fundamentals

2024-02-13 15:02:33 ET

Summary

• monday.com's stock has gained over 20% since December, but declined 9% after Q4 earnings and guidance aligned with the "base case" scenario.
• The company saw strong revenue growth in FY23, driven by enterprise adoption and a robust product portfolio.
• However, there are concerns about a slowdown in net retention rate and potential spending slowdown in SMB and mid-market segments. The stock is fully priced with limited upside.

Introduction and Investment Thesis

In December 2023, I initiated my coverage on monday.com ( MNDY ), where I had rated the stock a Buy. I had previously outlined that my bull thesis is predicated on the fact that Monday continues to see strong revenue growth in a large and growing TAM, driven by its successful penetration in the enterprise customer segment, deeper product adoption marked by dollar net retention at 110%, and improving margins. I had put a price target of $227 on the stock, which translated to a 20% upside from where the stock was trading back in December....

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