Tuesday, Oppenheimer maintained an Outperform rating on shares of monday.com Ltd. (NASDAQ: MNDY (NASDAQ:MNDY)) and increased the price target to $325 from the previous $275. The firm anticipates that the company will report third quarter revenue surpassing the management's sales guidance and consensus estimate.
The projected sales range provided by monday.com's management for the September quarter was between $243 million and $247 million, representing a 29.5% year-over-year increase at the midpoint. This is compared to a 34.4% growth in the second quarter of 2024 and a 38.2% increase in the third quarter of 2023. Analysts are estimating a consensus revenue of $246.1 million for the quarter, which would be a 30.1% year-over-year growth.
The analyst from Oppenheimer believes that monday.com has been conservative in its guidance, accounting for the challenging environment that may impact seat expansion, yet leaving room for potential upside.
The company has shown solid performance, particularly with upmarket gains, as it reported having 2,713 customers with an annual recurring revenue (ARR) over $50,000 in the second quarter of 2024, a 43.4% increase year-over-year. Moreover, the firm noted a steady net dollar retention rate of around 110%.
The anticipated revenue growth is also supported by the rapid customer addition for monday.com's sales CRM and development solutions. In the second quarter of 2024, monday sales CRM accounts increased by 22.3% quarter-over-quarter, reaching a total of 20,770, and monday Dev accounts grew by 30.1% quarter-over-quarter, totaling 2,719. The release of monday Service from beta to general availability is also expected to contribute to the company's performance.
Oppenheimer's outlook suggests that monday.com is well-positioned to gain market share, especially as the competitive landscape remains stable. The firm also points to potential incremental opportunities arising from the acquisition of Smartsheet (NYSE:SMAR) by Blackstone (NYSE:BX) and Vista Equity Partners, which is pending.
The analyst expects another quarter of strong top- and bottom-line performance, driven by robust execution in the core work management market and the initial uptake of CRM solutions.
In other recent news, monday.com has achieved significant financial milestones, reaching $1 billion in annual recurring revenue, following a 34% increase in second-quarter revenue and record GAAP profitability. The company's projected full-year revenue for fiscal year 2024 is expected to range between $956 million and $961 million.
Moreover, recent pricing adjustments are expected to contribute a $25 million benefit in 2024, and between $75 million and $80 million by 2026. In terms of mergers and acquisitions, monday.com recently acquired Smartsheet, a move that has been positively received by analysts from firms such as JPMorgan, Needham, Goldman Sachs, BofA Securities, and Loop Capital.
Analyst firms including DA Davidson, Wells Fargo, TD Cowen, JPMorgan, and Needham have updated their outlooks on monday.com. DA Davidson raised its price target to $300, maintaining a Neutral stance. Wells Fargo reiterated its Overweight rating with a price target of $315. TD Cowen increased its target to $320, maintaining a Buy rating.
JPMorgan and Needham maintained their targets at $300. These recent developments highlight the company's strong execution and potential for growth in a variable macroeconomic environment.
InvestingPro Insights
To complement Oppenheimer's optimistic outlook on monday.com Ltd. (NASDAQ: MNDY), recent data from InvestingPro provides additional context for investors. The company's impressive revenue growth of 35.22% over the last twelve months aligns with the analyst's expectations of strong top-line performance. This is further supported by an InvestingPro Tip indicating that analysts anticipate sales growth in the current year.
The company's financial health appears robust, with an InvestingPro Tip highlighting that monday.com holds more cash than debt on its balance sheet. This strong liquidity position could provide the company with the flexibility to invest in growth initiatives or weather potential economic headwinds.
monday.com's gross profit margin stands at an impressive 89.19%, which reflects the company's efficiency in delivering its software solutions. This high margin could contribute to the bottom-line growth that Oppenheimer anticipates.
It is worth noting that monday.com is trading near its 52-week high, with a significant price uptick of 59.28% over the last six months. This performance suggests strong investor confidence in the company's prospects, aligning with the positive analyst sentiment.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for monday.com, providing a deeper understanding of the company's financial position and market performance.
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