Monday.com stock price target lowered to $250 by Needham on SMB challenges

Investing.com - Needham has lowered its price target on monday.com Ltd. (NASDAQ:MNDY) to $250.00 from $400.00 while maintaining a Buy rating, following the company’s second-quarter financial results that fell below expectations. The $9.3 billion market cap company maintains strong financial health, with InvestingPro data showing an impressive gross profit margin of 89.5% and robust revenue growth of 32.25% over the last twelve months.

The stock dropped approximately 26% after the earnings report, which revealed higher customer acquisition costs in the SMB (small and medium-sized business) segment that limited customer growth and reduced second-half revenue projections by $3 million below prior implied guidance.

Despite these challenges, monday.com’s upmarket customer segment continues to be its primary growth driver, with net new additions of customers spending over $100,000 reaching an all-time high and those spending over $50,000 approaching record levels.

CRM customer additions fell to their lowest level since the fourth quarter of 2022, reflecting the impact of higher paid search costs on the overall SMB segment, while the company’s Service momentum remained strong among larger customers.

Needham reiterated its Buy rating on monday.com, characterizing the sell-off as "overdone" for a mid-20% growth, highly profitable SaaS vendor.

In other recent news, monday.com Ltd. has introduced three new AI capabilities designed to enhance productivity and streamline workflow creation. The features include monday magic for generating workflows, monday vibe for building custom applications without coding, and monday sidekick, a digital assistant that suggests actions based on user context. Additionally, monday.com announced the appointment of Harris Beber as the new Chief Marketing Officer, who previously led global marketing efforts at Google (NASDAQ:GOOGL) Workspace. On the financial front, Piper Sandler reiterated its Overweight rating on monday.com, highlighting the company’s potential for sustained revenue growth exceeding 20% and free cash flow margins above 25%. Needham also maintained its Buy rating with a $400 price target, expressing optimism about monday.com’s Customer Work Management product. Furthermore, monday.com has scheduled its annual general meeting for July 31, 2025, in Tel Aviv, where shareholders will vote on various proposals. These developments reflect the company’s strategic initiatives and ongoing growth potential in the software sector.

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