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Tuesday - Baird has increased the price target for monday.com Ltd. (NASDAQ:MNDY) to $275 from the previous $270, while maintaining a Neutral rating on the company's shares. Currently trading at $242.05, the company has demonstrated impressive financial health, earning a "GREAT" rating according to InvestingPro metrics. The adjustment comes as the market anticipates the fourth quarter of 2024 earnings and the fiscal year 2025 guidance from the company. Baird's analyst, Rob Oliver, provided insight into the reasoning behind the new price target.
Oliver noted that there is a significant debate among investors regarding the company's performance as they await the upcoming financial reports. The company has maintained strong growth momentum, with revenue increasing 33.9% in the last twelve months and boasting an exceptional gross profit margin of 89.46%. In light of this, Baird has decided to revise its projections slightly. The firm anticipates that monday.com may set its initial revenue guidance for the year 2025 below the market expectation of $1,221 million, which would represent a year-over-year increase of 26.4%. The forecast suggests a possible revenue growth rate in the low to mid-20s percentage range.
The analyst highlighted that the current risk/reward ratio for monday.com's stock has become more attractive, now standing at approximately 8.5 times the next twelve months' (NTM) revenue. This is a decrease from the previous multiple of around 13 times prior to the third quarter of 2024 results. While the stock currently trades at a high P/E multiple of 551x, InvestingPro analysis shows the company holds more cash than debt and maintains strong liquidity ratios. The market is looking for indicators of growth in new areas and improvements within the small and medium-sized business (SMB) segment to adopt a more positive stance on the stock.
Furthermore, Oliver pointed out potential growth opportunities for monday.com in specific sectors. The company's success in the developer segment (Devs) is seen as a low probability event by Baird. However, the customer relationship management (CRM) and IT service management (ITSM) sectors are identified as promising areas for expansion. With 21 analysts recently revising their earnings estimates upward, as noted in InvestingPro's comprehensive analysis (which includes 10+ additional insights), the company appears well-positioned for future growth. As the company navigates these opportunities, investors and analysts alike will be closely monitoring its progress and strategic initiatives.
In other recent news, monday.com Ltd reported robust Q3 2024 financial results, surpassing revenue expectations with a total of $251 million, a 33% increase year-over-year. The company's net income also rose to $45 million, outperforming the forecast of $0.63 earnings per share with an actual of $0.85. Despite these achievements, Scotiabank (TSX:BNS) analyst Allan Verkhovski adjusted the price target for the company to $300 from the previous $325, maintaining a Sector Outperform rating. This adjustment follows a 19% decline in monday.com's stock and signs of weakening international demand. The firm's analysts revised the bull case FY25 revenue growth estimate from 32% to 29% and reduced the base case FY25 revenue projection to $1.210 billion. This reassessment comes after the departure of Chief Revenue Officer Yoni Osherov and signals from management that significant investments may pressure the bottom line. However, the analysts remain optimistic about shares in 2025, stating that they see the current valuation as an attractive buying opportunity for investors. These are the latest developments for monday.com Ltd.
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