MNDY May 23rd Update

Recent Developments (Feb 2025 – May 2025)

Macroeconomic & Geopolitical Context: The early 2025 environment for SaaS and work management software has been marked by mixed signals. Global IT spending on software remains robust – Gartner forecasts SaaS spend to grow about 20% in 2025 to nearly $300 billion, driven in part by surging interest in AI capabilities. However, enterprise budgets are still under scrutiny amid high interest rates and geopolitical uncertainty (ongoing conflict in Eastern Europe, etc.), meaning customers are carefully prioritizing software investments. Monday.com’s Position: In this climate, Monday.com’s value proposition of efficiency and adaptability appears well-aligned with customer needs. Its focus on operational excellence and delivering clear ROI (e.g. helping companies consolidate tools) has helped it navigate macro headwinds effectively. Notably, despite challenges, Monday.com sells largely to non-tech industries and has sustained growth above the industry median – a testament to broad-based demand for its Work OS platform.

Financial Performance & Earnings Beats: Monday.com’s recent earnings have significantly outperformed expectations. In its Q4 2024 results (reported Feb 10, 2025), the company posted revenue of $268.0 million, up 32% year-over-year, beating consensus estimates (~$261M) and achieving record profitability. Non-GAAP EPS for Q4 came in at $1.08, far above the $0.79 expected. This strong finish to 2024 included accelerating operating margins (15% non-GAAP in Q4) and robust free cash flow of $72.7M in the quarter. Monday.com carried this momentum into 2025: Q1 2025 revenue was $282.3 million (30% YoY growth), once again beating forecasts and marking an acceleration from guidance. GAAP operating income turned positive at $9.8M (3% margin) vs a loss in the prior year, and non-GAAP operating profit hit $40.8M (14% margin). Non-GAAP EPS rose to $1.10, up ~80% year-on-year. This strong start prompted management to raise full-year 2025 guidance slightly – now expecting $1.220–$1.226 billion revenue (+25–26% YoY) – and indicate adjusted free cash flow of ~$310–$360M (25–26% margin) for the year. The market responded positively: Monday.com’s stock price jumped after the Q1 beat and currently trades around $290–$300, up ~20% year-to-date (though still below its 52-week high of $342). This reflects growing investor confidence that Monday.com can sustain high growth and profitability even in a cautious spending environment.

Competitive Landscape & Market News: Within the work management and collaboration space, Monday.com continues to gain ground relative to peers. Key competitors have seen growth slow markedly – for example, Asana’s revenue grew only ~19% in its FY2024 and Smartsheet about 21% in recent quarters, compared to Monday.com’s 30%+ growth. Monday.com’s ability to land larger enterprise deals and broaden its product suite has helped it outpace these rivals. Industry-wide, there is a rush to infuse products with AI capabilities, and Monday.com is no exception. The company’s leadership has highlighted “doubling down on AI” in 2025, focusing on new features like AI Blocks and a “Digital Workforce” of AI agents to automate routine tasks. This echoes moves by others (Atlassian, Notion, etc.) introducing AI-powered assistants, but Monday.com’s execution has been swift – positioning its Work OS as a cutting-edge, AI-enhanced platform for workflow automation. On the enterprise front, Monday.com is also leveraging partnerships: it recently announced integrations with backup and workflow tools like Rewind, Make, and Ziflow to enrich its ecosystem. Furthermore, at its 2024 Partner Summit the company noted a 59% jump in apps on the Monday Marketplace (now 650+ apps) and a growing global network of implementation partners. This expanding partner ecosystem strengthens Monday’s competitive moat, making it easier for customers to adopt and extend the platform.

Figure: Monday.com launched monday service, an AI-driven enterprise service management product (helpdesk platform). This is Monday’s fourth product line, aimed at IT and service teams, featuring AI-powered ticket handling and integration with the Work OS.

Product Launches and Innovation: A major development in this period was the full release of “monday service”, Monday.com’s new enterprise service management (ESM) offering. Officially launched in early 2025, monday service extends the Work OS into IT service desks and customer support workflows (see example dashboard above). It centralizes ticketing, incidents, and requests on the Monday platform with rich automation and AI features. Management noted that monday service has already become the company’s highest average contract value product, underlining strong early enterprise adoption. By consolidating helpdesk operations (with AI-assisted ticket resolution, automated routing, etc.) onto the Work OS, Monday.com is tapping into a new $30+ billion ITSM market traditionally served by players like ServiceNow and Jira Service Management. This product launch, alongside continued enhancements to existing modules (e.g. Monday Sales CRM, Monday Dev), broadens Monday.com’s reach and could drive further expansion within its customer base. The company’s rapid innovation cycle – adding AI “building blocks” and product “power-ups” – is not only a response to competitive pressure but also a proactive strategy to increase customer stickiness. By March–May 2025, Monday.com has clearly signaled that it is more than just a project management tool; it’s evolving into a unified Work OS platform that can handle projects, sales, development, and now service management – all areas where it is introducing AI to boost productivity. This multi-product approach and embrace of AI trends have been well-received in the market, and they underpin Monday’s confidence in sustaining 25%+ growth even as the overall SaaS sector’s expansion has moderated.

Reassessment of Key Performance Metrics (vs. Feb 2025 Report)

In our February 2025 report, we highlighted several core metrics critical to evaluating Monday.com’s performance – including its net dollar retention, LTV/CAC ratio, and other indicators like customer cohort growth and margins. Below we update each of these in light of the latest results:

• Net Dollar Retention Rate (NDR): Monday.com’s net dollar retention remains very strong, albeit on a gentle downward trend as the company scales. As of Q1 2025, overall NDR is 112% on a trailing 12-month basis – meaning the average customer spends 12% more than a year ago, after accounting for churn. This is essentially unchanged from the 112% reported at year-end 2024, and only slightly below the “120%+” levels Monday maintained in earlier years when it was smaller. Importantly, expansion within larger accounts continues to outpace the average: for customers with >10 users, NDR is 115%, and for enterprise customers with >$100k ARR it’s 117% as of Q1. These figures indicate that Monday.com is still achieving ~15–17% annual expansion from its bigger clients, a healthy rate that reflects effective upselling of seats and modules. In our prior analysis, we noted NDR had eased from ~120–130% in 2021–2022 down to the mid-teens by 2023. The latest data confirms that this metric has “normalized” around the low-to-mid teens, which is common as a SaaS vendor matures. Crucially, an NDR in the 110–120% range remains excellent – it means Monday.com can grow double-digits before adding any new customers. This high retention/expansion is fueled by continuous product innovation (e.g. adding features like Automations, WorkDocs, and now AI integrations over time) that increases the value for existing users. It also compares favorably to peers: many other work software firms have seen net retention dip to ~105-110% recently due to macro pressures. Monday.com’s ability to keep NDR above 110% underscores strong customer success and low churn in its base.
• Customer Acquisition Efficiency (LTV/CAC): The combination of high retention and improving margins has translated into strong unit economics for Monday.com. We estimated in Feb 2025 that the company’s LTV/CAC (lifetime value to customer acquisition cost) exceeded 3× in 2023–24, meaning the projected lifetime gross profit from a customer is over three times the cost to acquire them – a clear indicator of efficient growth. This ratio likely remains >3x in 2025 given recent trends. Sales & marketing expense as a percentage of revenue has been trending down as growth moderates, and gross margins are extremely high (~89–90%), which boosts LTV. In Q1 2025, Monday.com’s gross profit margin was 90% – best-in-class for SaaS – providing ample unit economics to recover customer acquisition costs quickly. Meanwhile, customer acquisition has not slowed: total paid customers with >10 users grew ~9% YoY to 60,566 as of Q1 2025, and the number of enterprise customers is soaring (customers with >$50k ARR up 38% YoY to 3,444; those >$100k ARR up 46% YoY to 1,328). This expansion of large accounts boosts LTV, since bigger customers tend to stay longer and spend more over time. With net retention holding strong, Monday.com is extracting significantly higher lifetime value from cohorts than a few years ago, even as acquisition spend has grown more efficient. Bottom line: all signs point to LTV/CAC remaining comfortably above 3x – a level associated with sustainable SaaS growth. Management’s focus on efficient growth (they often emphasize “high ROI on marketing spend” and have kept customer payback periods reasonable) supports this. In sum, Monday.com’s unit economics are solid: it can invest in scaling sales without jeopardizing cash flow, thanks to loyal customers and a land-and-expand model that consistently pays off.
• Other Key Indicators: Free Cash Flow (FCF) and margins are another bright spot. Monday.com has turned its rapid revenue growth into hefty free cash flow, reflecting disciplined cost management. In 2024 the company generated $295.8M in free cash flow (FCF margin ~30%). In Q1 2025, it achieved a record $109.5M in adjusted free cash flow, up from $89.9M a year ago. This means FCF margin actually exceeded 38% in the first quarter – exceptionally high – though full-year FCF is guided to ~25% margin as some costs normalize. Nonetheless, the trajectory is clear: Monday.com’s growth is now self-funded, and it boasts a cash-rich balance sheet (over $950M in cash, virtually no debt). Profitability metrics are improving across the board. Non-GAAP operating margin was 15% in Q4’24 and 14% in Q1’25, up from ~10% a year prior. The company even achieved a GAAP net profit in Q1 (GAAP EPS $0.52), a notable milestone for a firm that was posting significant losses just 1–2 years ago. This margin expansion is expected to continue gradually – Monday.com’s full-year 2025 outlook calls for an 11–12% non-GAAP operating margin, which the company is already exceeding. Growth vs. profitability balance: Whereas the February report noted Monday’s minimal GAAP earnings and very high P/E multiples, the updated numbers show accelerating earnings (TTM non-GAAP EPS now ~$4+, GAAP EPS turning positive). As a result, valuation metrics like EV/Sales and EV/FCF are becoming more meaningful relative to pure revenue multiples. Finally, productivity and R&D output remain high – the company’s rapid release of new products (like monday service) and features (AI agents) indicates that R&D investments are paying off in terms of platform enhancement. This, in turn, reinforces key metrics like retention and customer growth. All considered, the key performance indicators are either holding strong or improving: net retention ~112%, LTV/CAC >3x, 30% growth with rising margins, and solid cash generation. These metrics validate the positive outlook we had in the prior report and give confidence in Monday.com’s long-term trajectory.

Updated Valuation and Rationale

• DCF Assumptions Recap: In our model, we used FY2024 as the base year (actual revenue $972M, FCF ~$296M) and projected ~25% revenue growth for 2025 (in line with management’s guidance of ~$1.22B). We assumed this growth rate would gradually taper over the next 5–7 years, while FCF margins step down modestly from ~30% toward a sustainable ~25% in the long run. We applied a WACC of 10% to discount future cash flows, reflecting the still-elevated risk-free rates and a risk premium appropriate for a mid-cap high-growth tech stock. We also used a conservative terminal growth rate of ~3%. These assumptions yielded an intrinsic enterprise value in the high single-digit billions and an implied equity value roughly in the $240–$300 per share range under moderate scenarios. However, as noted in February, the DCF outcome was highly sensitive to inputs; extending the high-growth period or using a slightly lower discount rate (e.g. 9%) could push the DCF value closer to $300+. In our final valuation, we reconciled this with relative valuation metrics, arriving at a fair value around the low-to-mid $300s per share.
• What’s Changed: Since that analysis, Monday.com’s performance has essentially validated or exceeded our key forecasts. The company’s 2025 revenue outlook of $1.22B is unchanged to slightly higher (guidance midpoint nudged up after Q1), and the growth profile (25–26% YoY) matches our DCF input. Importantly, profitability is tracking ahead of our expectations: Monday.com’s FCF in Q1 alone was one-third of the full-year projection ($350M for 2025 in our model), suggesting upside to our $350M FCF figure. If Monday.com continues beating on margins or keeps FCF closer to 30% of revenue (as it did in 2024), the DCF intrinsic value would be at the higher end of our prior range, potentially north of $300. On the other hand, macro conditions and the cost of capital have not dramatically improved – interest rates in mid-2025 remain high, so we keep the 10% discount rate for prudence. The slight increase in geopolitical and market volatility also justifies maintaining a reasonable risk premium. Netting these out, our updated DCF analysis would likely still center around $300 per share intrinsic value, and could inch higher if we factor in the stronger margin trajectory. That said, in valuing a company like Monday.com, we also consider market sentiment and relative valuation.
• Market Multiples & Sentiment: High-growth software stocks have seen some multiple expansion in 2025 due to enthusiasm for AI and an improving earnings outlook. Monday.com currently trades around 12.5× TTM revenue, which is roughly in line with its 2023–24 average EV/Sales multiple. This is a premium to slower-growth peers (for example, Smartsheet and Asana trade at lower sales multiples given their sub-20% growth), but the premium is merited by Monday’s superior growth and profitability profile. On an EV/FCF basis, Monday’s multiple is more reasonable (~45× forward FCF, given ~$13B EV and ~$300M+ FCF forecast), which underscores the quality of its earnings and cash flow. Our prior report noted that an approx. $350 stock price equated to about 12–13× forward sales and implied continued investor confidence. That remains the case – at a ~$332 fair value, Monday.com would be valued around 11× 2025E sales (using the $1.22B revenue outlook) and ~35–40× forward free cash flow, assuming it hits the high end of FCF guidance. Those multiples are high in absolute terms, but not unheard of for a company delivering ~25–30% growth with 90% gross margins and a long runway. Moreover, Wall Street analysts remain bullish: the consensus price target is in the $350–$400 range, with several top-tier banks recently reiterating Buy ratings given Monday’s execution. In February, consensus was ~$352; as of May, some targets have edged up (e.g. one noted upgrade after Q1 beat). Our $332 intrinsic value is slightly below that consensus, reflecting a balanced stance that acknowledges execution risks and macro factors, but it is firmly within the ballpark.
• Maintaining Fair Value Estimate (~$330 – 350 per share): After reassessing the inputs and new data, we conclude that our previous DCF-based fair value of $332 and peer mutiples estimate of $350 – 400 per share remains appropriate. Monday.com’s fundamental outlook – high-teens to 20%+ growth for several years, steady margin expansion, and significant free cash flow generation – is unchanged or even stronger now. The supportive industry trends (digital transformation, AI adoption) and Monday’s competitive gains reinforce the growth assumptions behind our valuation. One could argue for a modest upward revision (for instance, if we expect Monday to outperform its 2025 guidance, the DCF would inch higher). However, to be conservative, we stick with ~$330 as the long-term intrinsic value and $350 as a fair 12-month price target, aligning with our original target and current analyst consensus. This target already embeds a premium for Monday.com’s best-in-class metrics and assumes the market will continue to reward its profitable growth. It’s worth noting that at the current ~$290 share price, this implies roughly 15–20% upside. We believe that upside is justified by several factors: (1) Proven Resilience: Monday.com has demonstrated it can grow rapidly even in a tougher macro environment, de-risking the investment case. (2) Margin Expansion: The inflection to profitability reduces uncertainty and could lead to multiple expansion as more investors value it on an earnings basis. (3) Optionality from AI & New Products: The successful rollout of monday service and AI features could open new revenue streams or upsell opportunities not fully captured in consensus estimates. Together, these support a premium valuation. We do caution that any deterioration in retention or a major macro shock could cause the stock to trade below our fair value (high-growth names can be volatile). Nonetheless, with net cash on the balance sheet, accelerating cash flows, and a growing competitive moat, Monday.com offers a compelling risk/reward profile. Our conclusion is to reiterate a fair value in the low-mid $300s per share, which positions Monday.com as an attractive long-term investment for individuals seeking exposure to a high-growth, high-margin SaaS leader in the work management space.

Sources:

• Company press releases and SEC filings for Q4 2024 and Q1 2025 results
• Monday.com Investor Relations – FY2024 earnings highlights, guidance and business updates
• Neo Equity Research Feb 2025 Report (prior analysis of Monday.com)
• SaaS industry data and competitor references (SaaStr, Gartner, peer financials)
• Monday.com product news (AI initiatives, Monday Service launch) and partner ecosystem developments.