By Monday.com stock price has staged a strong recovery and surged to its highest level since November 2021 ahead of its quarterly earnings this week. MNDY surged to a high of $325 on Friday, up by over 335% from its lowest level in 2022.
Monday.com stock surges ahead of earnings
Monday, a popular company in the Software-as-Service (SaaS) industry has done well as investors brace for its earnings scheduled for Nov. 10.
These earnings are expected to show that its trajectory continued in the last quarter as demand for its solutions jumped.
Precisely, analysts expect the numbers to reveal that its revenue jumped by 30% in the last quarter to $246 million.
The company is also expected to issue a strong guidance, with its fourth-quarter revenues expected to be $260 million, a 28.7% increase from the same period last year.
If these results are accurate, it means that Monday’s annual revenue will be $960 million, a 31% increase from last year. It will then make $1.2 billion in the next financial year.
Most notably, Monday.com has become a profitable company, with its annual earnings per share expected to be $2.85, up from $1.85 in the same period last year.
Fortunately, MNDY has a long track record of doing better than estimates. For example, its last earnings per share was 63 cents, up by 38 cents from what analysts were expecting.
MNDY’s business has been growing
For starters, Monday.com is a top company that is widely used by some of the biggest companies globally. Some of its top customers are firms like Wix, Universal Music Group, Coca-Cola, Adobe, Hulu, and Unilever.
Its solution is used in project management and customer relations management. As such, this is a highly competitive market, where it competes with companies like Atlassian, Asana, ClickUp, SmartSheet, and Notion.
One of the benefits of this business is that it has recurring revenues, low churn among big customers, and large opportunities to upsell its clients. Most importantly, it has a high chance of growing its profit margin since it has a gross margin of 91%.
Its annual revenue has been in a strong growth trajectory in the past few years as its revenue jumped from over $78.1 million in 2019 to over $844 million in the trailing twelve months (TTM).
This growth happened as the number of high-valued customers jumped. Firms spending over $50,000 a year rose to over 2,713, a continuing trend. Total customers rose to 225k in the second quarter, up from 90k in 2019.
The most recent financial results showed that Monday.com’s business was growing as its revenue jumped by 34% to $236 million.
A key concern for Monday.com is that its business is relatively overvalued, considering that it faces substantial pressures growing its business. It has a forward non-GAAP price-to-earnings ratio of 113, higher than the sector median of 25.
A company like Monday.com is best valued using the rule-of-40 metric since it has started being profitable recently. The rule of 40 metric is calculated by adding its growth and profit margins.
In Monday’s case, it has a forward revenue growth figure of 33% and a net income margin of 4.88%, giving it a rule of 4o metric of 37.88. This means that the company is fairly overvalued for now. Indeed, the average Monday.com stock forecast by analysts is $315.96, higher than the current $355.
Read more: Baird begins coverage of Monday.com with $250 target and neutral rating: Is it worth investing??
Monday.com share price analysis
The weekly chart shows that the MNDY share price has been in a strong growth in the past few years. It has surged and moved above the 61.8% Fibonacci Retracement level.
The stock has also moved above the upper side of the ascending channel shown in orange. Also, it has remained above the 50-week and 200-week Exponential Moving Averages (EMA).
The Relative Strength Index (RSI) and the MACD indicators have continued tising, showing that it has a strong momentum.
Therefore, the stock may drop and retest the upper side of the channel at $300 after earnings, pointing to a 7.5% drop from the current level.
In the long term, however, the Monday.com stock price could jump to an all-time high at $450, which about 40% above the current level. This view will be confirmed if the stock moves above the key resistance level at $370, the 78.6% Fibonacci Retracement point.
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