Monday.com surges as DA Davidson upgrades to buy on 'positive' Q4
Monday.com (NASDAQ:MNDY) shares surged on Thursday after investment firm DA Davidson upgraded the software provider to buy, with the firm noting it is "okay" with a tradeoff of investing now for growth down the line.
Analyst Robert Simmons upgraded the stock to buy, but lowered the price target to $170 from $275, noting that monday.com generated positive free cash flow "ahead of schedule" and the company's 2022 guidance was a "mix of good revenue and worse margin."
"The company is bringing out new products, strengthening its top of funnel, and expanding its go-to-market, giving us confidence in the long-term durability of growth," Simmons wrote in the note to clients.
Monday.com shares rose more than 8% to $139.10, one day after touching a new 52-week low.
Several other workforce application stocks rose on Thursday as well, with Intuit (NASDAQ:INTU), Salesforce.com (NYSE:CRM), ServiceNow (NYSE:NOW), Paycom Software (NYSE:PAYC) and others gaining roughly 2%.
On Wednesday, the Roy Mann-led software provider said it generated $95.5M in revenue during the period, but lost an adjusted 26 cents per share. Analysts were expecting the company to generate $87.8M in revenue, while losing an adjusted 52 cents per share.
Monday.com said it expects first-quarter revenue to be $100M-102M, with a non-GAAP operating loss between $47M-45M. Analysts were expecting the company to forecast $94.09M in sales for the first quarter. For 2022, monday.com said it expects revenue to be between $470M-475M, with a non-GAAP operating loss between $147M-142M.
In addition, Simmons noted that although the margin guidance was lower for 2022 than it was in 2021, the company is leaning into growth and given the strong unit economics, the firm is okay with this decision.
"We believe guidance is conservative, on both the growth and margin fronts, and see multiple drivers of long-term performance that are either not in numbers or barely in them at this time," Simmons added. "With the stock off ~70% from its 52-week high, and what we see as an excessive reaction to merely very good results and guidance, we're now BUY rated."
Earlier this month, monday.com shares fell sharply after the company aired its first Super Bowl ad, entitled “Work Without Limits.”