On Monday , Bank of America initiated coverage on monday.com Ltd. (MNDY (NASDAQ:MNDY)), a prominent player in the collaboration software market, with a Buy rating and a $280 price objective. The firm highlighted the company's strong positioning to grow revenues at a compound annual growth rate (CAGR) of 30% through the fiscal year 2026. The optimism for the stock is based on several factors, including the potential for monday.com to surpass consensus estimates, continue gaining market share, offer value at its current price compared to peers, and leverage its expansion into the enterprise market and new product launches to drive long-term growth.
Bank of America anticipates monday.com to achieve a rule of 55 status—where the sum of revenue growth and free cash flow (FCF) margin exceeds 55—in 2024. The firm's revenue and FCF estimates for fiscal year 2024 are 3% and 15% above the consensus, respectively. This outlook is based on the expectation that the market is underestimating the company's near-term growth opportunities. Despite trading at a 37% discount to its rule of 50 software peers on an enterprise value to calendar year 2025 estimated revenue (EV/C25Erev) basis, the firm sees the recent decline in share price following fourth-quarter 2023 earnings as an opportunity to buy.
The analysis by analysts, along with Gartner vendor evaluations, indicates that monday.com's platform is well-equipped to continue capturing market share in the competitive and fragmented collaborative work management (CWM) market. The company has received the highest average product score from Gartner among 10 competitors, which is based on seven use cases. With improvements in the platform's scalability on the horizon, analysts expect a significant increase in enterprise deployments, which should boost average revenue per user (ARPU), seat expansion, user retention, margins, and market efficiency.
Bank of America's price objective for monday.com is derived from a 10.7x multiple on the company's expected 2025 enterprise value/revenue, which represents a premium compared to the high growth software and collaboration software peer groups. However, this premium valuation is justified by monday.com's higher growth and margin expansion potential, according to the firm.