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On Monday, TD Cowen adjusted its price target for monday.com Ltd. (NASDAQ: MNDY), a leading provider of Project Management solutions, reducing it to $300 from the previous $325. Currently trading at $255.97, the stock maintains a "GREAT" financial health score according to InvestingPro analysis. Despite the price target cut, the firm continues to recommend the stock as a Buy. The decision comes after the analyst’s evaluation of the company’s performance and market conditions, particularly in the EMEA region.
The analyst noted that investor apprehensions that became apparent in December were validated, as demand for monday.com’s core Project Management solutions weakened in November and the decline persisted into December. Although the EMEA region showed a downturn, the analyst highlighted that the demand in the United States remains strong and the momentum for the company’s Customer Relationship Management (CRM) offerings continues to be high. The company maintains impressive gross profit margins of 89.5% and achieved revenue growth of 33.9% over the last twelve months.
The analyst expressed that the current valuation of monday.com’s stock, trading at approximately 33 times its expected CY26E Free Cash Flow (FCF), is attractive. The reduction in the growth estimate from 27% to 24% reflects the anticipated impact of the softer demand in the EMEA region on the company’s financial year 2025 guidance, which is predicted to be below the Street’s expectations.
The firm anticipates that the upcoming initial guidance from monday.com will serve as a "clearing event," potentially addressing the concerns and setting the stage for future growth. Investors are being reassured that the current stock price likely reflects the concerns regarding the EMEA demand, suggesting that the lowered expectations have already been factored into the market valuation.
In other recent news, monday.com Ltd. has been the subject of analyst revisions and released its Q3 2024 earnings report. Baird raised its price target for the company to $275, maintaining a neutral rating, while Scotiabank (TSX:BNS) reiterated an outperform rating despite a 19% share fall, adjusting the price target to $300. Both firms anticipate monday.com’s revenue guidance for 2025 to fall slightly below market expectations, with Baird predicting a growth rate in the low to mid-20s percentage range, and Scotiabank revising its FY25 revenue growth estimate to 29%.
In its Q3 2024 earnings report, monday.com surpassed revenue expectations, reporting $251 million against a forecast of $246.17 million. The company also reported a net income increase to $45 million, with earnings per share at $0.85, exceeding the forecast of $0.63. Despite these positive results, the company’s stock price fell by 19.65%.
Analysts from Baird and Scotiabank have identified potential growth opportunities for monday.com in specific sectors, such as the customer relationship management (CRM) and IT service management (ITSM) sectors. However, Baird considers the company’s success in the developer segment as a low probability event. These recent developments provide investors with valuable insights into the company’s performance and future prospects.
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