The largest gainer on Wednesday was a technology stock called Monday.com (NASDAQ:MNDY), which surged greater than 24% in the course of the trading day.
The corporate, which produces customer relationship management (CRM) software to assist businesses manage their workflows, was still up some 19% in afternoon trading at around $216 per share. Monday.com stock jumped on a blowout earnings report and better-than-expected guidance for the approaching quarters.
Let’s have a look to see if the stock continues to be a buy after this big jump.
Great step forward
The corporate launched in 2012 as Dapulse before changing its name to Monday.com in 2017. It went public in 2021, and its stock has been pretty volatile, soaring 40% in 2021, plummeting 60% in 2022, and surging 54% in 2023.
That volatility aside, what has been impressive is that Monday is already profitable — something that is not any small task for a whole lot of tech startups.
The primary-quarter results released on Wednesday illustrate the firm’s rapid growth. Monday generated $217 million in revenue, up 34% yr over yr. Operating expenses rose 18% to $198 million, leading to an operating lack of $5 million, although that was significantly higher than the $22 million operating loss in the identical quarter a yr ago. Nonetheless, Monday’s non-GAAP operating income was $21.5 million, up from a $293,000 loss in the identical quarter a yr ago.
Overall, the corporate posted GAAP net income of $7.1 million, up from a $14.7 million net loss in Q1 2023. It was the fourth straight quarter of profitability, as Monday posted earnings of 14 cents per share in Q1.
The firm posted a net dollar-retention rate of 110%, which suggests it was effective in not only retaining customers but additionally up-selling them. Monday also increased its variety of paid customers with greater than 10 users by 18% yr over yr to 55,515.
This increase resulted in record quarterly free money flow of about $90 million, up from $39 million the identical quarter a yr ago. The free money flow margin, which is revenue converted into free money flow, was 41% — up from 24% a yr ago. This can be a key metric, especially for a young company, because it provides the power to speculate and grow.
“Q1 represents one other great step forward for monday.com, with strong revenue growth and profitability, in addition to record free money flow. These results are supported by recent adjustments made to our pricing model, which so far have exceeded our initial expectations,” said Monday.com Chief Financial Officer Eliran Glazer.
Analysts love Monday
Monday not only smashed analysts’ estimates for the quarter; it also issued guidance that was higher than anticipated.
The corporate projects Q2 revenue of $226 million to $230 million, which could be 4% to six% higher than Q1 and 29% to 31% beyond Q2 2023. Further, it expects non-GAAP operating income of $17 million to $21 million, which could be up yr over yr but down on the midpoint from Q1.
For the total fiscal yr, Monday sees its revenue at $942 million to $948 million, which could be up by 29% to 30% versus fiscal 2023. Non-GAAP operating income is projected at $77 million to $83 million, up from $61.6 million in 2023, while free money flow is anticipated to be between $238 million and $244 million in fiscal 2024, up from $205 million last yr.
Analysts liked what they saw, particularly Jefferies’ Brent Thill, who raised his price goal for Monday to $270 from $250, saying the firm is delivering on its targets. The median price goal for the corporate is $250, which is a few 37% higher than the present price.
Monday.com stock is up nearly 22% yr so far, with Wednesday’s run-up accounting for many of that gain. While it is difficult to not just like the path that Monday is on, regulate its valuation, because the price-to-sales ratio is 12 and the forward P/E is 91.
Is the stock a buy? The valuation looks a bit too high, but there’s quite a bit to love, so put it in your radar.