TipRanks Smart Growth Newsletter #6: Building Blocks to Billions
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Dear Investors,
Welcome to the sixth edition of our brand new TipRanks Smart Growth Newsletter.
Through the Smart Growth Newsletter, we aim to provide you with high-potential investment insights to support your growth strategy. Each week, our analysts will identify cutting-edge companies positioned to capture market share and deliver exceptional growth, giving you unique insights in a dynamic investing landscape.
Stocks we recommend have been carefully analyzed and vetted, using TipRanks data, ensuring you receive well-researched, high-potential opportunities aimed at delivering substantial, long-term growth. We will present you with a comprehensive analysis that outlines our selection process, giving you clear insights into why each stock stands out as a top growth opportunity.
With that in mind, let’s dive into this week’s top pick and explore why it could be a valuable addition to your Growth portfolio.
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This Week’s Top Growth Pick: monday.com (MNDY)
monday.com Ltd. is a software company that develops a cloud-based Work OS, a visual platform for team collaboration, project management, and workflow optimization. The platform consists of modular building blocks that can be customized and assembled to create software applications and work management tools. MNDY’s platform integrates customizable workflows, real-time data visualization, and automation tools, enabling organizations to streamline operations, enhance productivity, and foster cross-team collaboration to achieve their goals efficiently.
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Here’s Why MNDY’s Stock Is Likely to Grow:
❖ AI-Driven Innovation: monday.com’s platform leverages advanced AI tools and automation to optimize workflows, streamline operations, and enhance productivity for diverse business needs.
❖ Expanding Market Penetration: Strong customer retention, growing enterprise adoption, and increased upselling reflect MNDY’s ability to capture more of its addressable market.
❖ Consistent Revenue Growth: With rapid ARR expansion and robust top-line growth, monday.com is scaling efficiently while maintaining exceptionally high gross margins.
❖ Path to Sustained Profitability: Achieved non-GAAP profitability, with improving operating leverage and free cash flow, signaling operational efficiency and financial discipline.
❖ Solid Financial Position: A debt-free balance sheet, substantial cash reserves, and positive free cash flow provide stability and room for strategic investments or acquisitions.
❖ Attractive Valuation & Analyst Support: Following a recent correction, MNDY offers an attractive valuation with analysts projecting significant upside.
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Building Blocks of Success
Founded in 2012 in Tel Aviv, Israel, monday.com began as a simple project management tool aimed at making team collaboration easier. Originally called “daPulse,” the company rebranded to monday.com in 2017 to reflect its bold vision of creating a dynamic Work OS platform.
Over the years, monday.com has prioritized innovation, introducing features like automation, integrations, and advanced reporting to meet the evolving needs of its users. The platform’s modular architecture allows teams to create tailored workflows, making it a flexible solution for businesses of all sizes and industries.
The company’s growth accelerated with a $150 million Series D funding round in 2019, which valued it at $1.9 billion and supported global expansion efforts, granting MNDY “unicorn” status. In 2021, monday.com went public on Nasdaq, raising $574 million at a valuation exceeding $6 billion. Today, just three years after its IPO, the company’s market cap has reached nearly $12 billion.
The year 2020 was pivotal for MNDY, with several key milestones reached. The company surpassed 100,000 customers and launched Monday 2.0, marking its transformation into a Work OS. Despite Covid-19 restrictions, MNDY expanded its U.S. presence and hired teams in the U.K. and Australia. It also launched its apps marketplace, allowing developers to build apps on its platform.
To further strengthen its ecosystem, monday.com developed integrations with tools like Microsoft Teams, Slack, and Salesforce. In 2022, it expanded its offerings with solutions like Monday Work Management, Monday CRM, and Monday Dev, moving beyond project management into software development, marketing, and operations.
In recent years, monday.com has introduced AI Assistants, enhanced automation, improved integration management, and expanded CRM and Dev tools. It also rolled out mondayDB, a data infrastructure built to underpin its Work OS platform and boost customer adoption.
While focusing on organic growth, MNDY’s co-founders have hinted at exploring acquisitions to complement its capabilities and accelerate growth.
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Innovation, Meet Collaboration
MNDY’s technology is built around its Work OS, a highly customizable platform that empowers teams to design workflows tailored to their needs. The platform leverages modular building blocks – such as boards, automations, and integrations – that can be combined to create personalized solutions for project management, operations, and beyond. This flexibility enables businesses of all sizes to seamlessly adapt the platform to their processes without requiring extensive technical expertise.
The company’s commitment to R&D is evident, with over 21% of its 2023 revenue reinvested into technological advancements. From leveraging AI for smarter automation to refining its platform with user-centric features, monday.com continues to innovate and reimagine existing tools. MNDY’s drag-and-drop interface simplifies workflow design, eliminating the need for coding. AI-driven tools automate repetitive tasks, streamline processes, and provide predictive insights, making advanced technology accessible to non-technical teams.
What sets monday.com apart is its user-centric design, ease of use, and scalability. Its visually engaging interface reduces learning curves and fosters collaboration. Advanced features like robust analytics and integrations with CRM platforms, workflow systems, and messaging apps ensure adaptability across various business ecosystems.
MNDY’s versatility extends beyond project management into CRM, marketing, and software development. Its commitment to innovation positions it strongly for sustained growth, especially as hybrid and remote work models proliferate.
Source: monday.com Q3 2024 Investor Presentation
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Debt Free, Cash Rich
Unlike many growth companies, monday.com carries no long-term debt on its balance sheet. The firm’s liabilities are primarily short-term and include accounts payable, accrued expenses, deferred revenue, and operating lease liabilities.
In addition, MNDY maintains a robust cash position, with cash and cash equivalents totaling approximately $1.34 billion as of the end of Q3 2024. This strong liquidity provides the company with the flexibility to support strategic initiatives such as R&D, platform enhancements, and potential acquisitions.
During Q3 2024, monday.com generated $86.6 million in operating cash flows, up from $66.6 million in the same quarter of the prior year. For the first nine months of 2024, operating cash flow totaled $234.4 million, reflecting the MNDY’s ability to consistently generate cash from its core operations. Free cash flow also improved, reaching $82.4 million in Q3 2024 compared to $64.9 million in Q3 2023. For the year-to-date period, FCF was $223.1 million, highlighting the company’s capacity to convert revenue into cash even after capital expenditures.
The upward trend in FCF and operating cash flow points to increasing operational efficiency and effective revenue management. These metrics suggest that monday.com is generating cash reliably, positioning the company to support its operations and fund growth initiatives without dependence on external financing.
Source: monday.com Q3 2024 Investor Presentation
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Scaling Success, Sustaining Growth
Over the past three years, MNDY’s revenues have grown at a CAGR of over 46%, driven by its platform’s versatility, strategic partnerships, geographic expansion, effective branding, enterprise account growth, and strong customer retention. Total Q3 2024 revenue reached $251 million, a 33% year-over-year increase.
Non-GAAP EPS has expanded at a CAGR of 16.2% during this period. Despite prioritizing growth over bottom-line maximization, monday.com achieved non-GAAP profitability in 2022, supported by operational efficiencies, scaling revenues, and extremely high gross margins. In Q3 2024, EPS reached $0.85, reflecting 33% YoY growth.
A key milestone was crossed in Q3 2024 as monday.com surpassed $1 billion in annual recurring revenue (ARR), underscoring its scalability, consistent revenue generation, and operational efficiency. This milestone signifies strong customer retention and predictable cash inflows, bolstering its capacity to reinvest in R&D and global expansion.
Source: monday.com Q3 2024 Investor Presentation
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The quarter also highlighted robust customer retention and expansion, with a net dollar retention rate (NDR) of 111% overall and even higher rates among larger customers. Enterprise adoption surged, alongside strong growth in high-value accounts. These metrics reflect a solid product-market fit and position monday.com for sustained ARR growth, improved operating leverage, and financial predictability.
Looking ahead, MNDY projects Q4 revenue growth of 28-29% and full-year top-line growth of 32%, with an operating margin of 12-13% and FCF margin around 30%. While no 2025 guidance has been provided, the company remains optimistic about maintaining its growth trajectory at scale. It is typical for growth companies like monday.com not to provide full-year guidance at this stage, as they focus on adapting to dynamic market conditions and prioritizing strategic investments.
Source: monday.com Q3 2024 Investor Presentation
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From Surge to Steady Gains
MNDY’s stock was on a tear this year, but a post-earnings drop pared its year-to-date gain to approximately 32%. Despite strong quarterly results, the stock fell due to a smaller-than-expected Q3 revenue beat and somewhat muted full-year guidance. While the company’s full-year forecast exceeded analyst estimates at the midpoint, it fell short of lofty investor expectations.
The stock’s prior run-up had pushed valuations to stretched levels, contributing to the sell-off. Leadership changes, including the appointments of a new Chief Operating Officer and Chief Revenue Officer, added a layer of uncertainty. Meanwhile, macroeconomic challenges in Europe – responsible for nearly a third of the company’s revenue – further dampened sentiment.
They project MNDY’s revenue to grow annually by 20-30% over the next three years, with earnings expected to increase at a remarkable 40-60% per year. These forecasts reflect the company’s strong track record, ongoing investments in AI-powered product enhancements, and ambitions for deeper international market penetration.
MNDY’s emphasis on expanding its high-value customer base positions it to implement price increases and capitalize on upselling and cross-selling opportunities. The company’s total addressable market (TAM) is estimated at $100 billion across its business segments, growing at 14% annually. Its cash-rich, debt-free balance sheet provides stability and flexibility for potential M&A activity, while also mitigating downside risks.
The stock’s recent decline has created an attractive entry point for investors, with current and forward multiples now more appealing. While monday.com remains richly valued compared to most peers, it justifies its premium through superior revenue growth rates, profitability, and cash generation capabilities. Unlike competitors still grappling with profitability, MNDY boasts a positive net income margin and ROE, with its EBIT margin approaching positive territory. Analysts highlight these strengths, alongside its strategic market position, as reasons for optimism.
Brokerages including Citigroup, Piper Sandler, Jefferies, Canaccord Genuity, and TD Cowen have reiterated positive outlooks, citing strong financial performance and growth momentum. MNDY was also named among Scotiabank’s top Software and Services picks, JPMorgan’s “Analyst Focus List” of best growth ideas, and William Blair’s top selections for 2025.
TipRanks’ top-rated Wall Street analysts expect MNDY’s stock to resume its upward trajectory, rating the stock a “Strong Buy” and projecting an average upside of over 37% in the next 12 months.
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To Sum It All Up
monday.com is a leading provider of a cloud-based, highly customizable Work OS platform that enables organizations to enhance collaboration, streamline operations, and boost productivity. The company maintains a strong financial position with no long-term debt, substantial cash reserves, and robust free cash flow generation. MNDY demonstrates consistent revenue growth and exceptionally high gross margins. With annual recurring revenue surpassing $1 billion, EBIT margin nearing positive territory, and non-GAAP profitability already achieved, monday.com is on a clear path to sustained profitability. The company continues to innovate, expanding its offerings and strengthening integrations with major business tools. Despite recent market volatility, analysts remain optimistic about its long-term growth, citing strong customer retention, scalability, and a growing addressable market. With attractive valuations and significant upside potential, MNDY offers a compelling investment opportunity for growth-focused investors.
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Click here for more stock analysis from TipRanks Macro & Markets research analyst Yulia Vaiman
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