Growth stock Monday.com is getting quite close to its 171.99 buy point. Shares rebounded from the 50-day moving average on May 15 after earnings came out, and have continued to rally. Monday.com is today's selection for IBD 50 Stocks to Watch.
First-quarter sales grew 50% to $162.3 million while earnings per share of 14 cents showed the software maker turning around to profitability from a year-ago loss.
The company also generated free cash flow of $38.7 million, a tremendous change from negative free cash flow of $16.2 million in the first quarter of 2022. Wall Street estimates tremendous 2024 growth of 138% — a big rebound from the 70% drop expected this year.
Monday.com's Composite Rating of 97 and Relative Strength Rating of 95 are shows of strength. Its EPS Rating of 81 is adequate. Strong interest from fund managers shows up in the Accumulation/Distribution Rating of B.
Monday.com is in the enterprise software group, which holds 21st place among IBD's 197 industry groups.
IBD MarketSmith chart analysis also shows that the cup is a first-stage pattern, which tend to produce some of the best gains from breakouts. The relative strength line is at a 52-week high, showing the growth stock is outperforming the S&P 500. The stock is approaching a new high and the highest since April 2022.
The enterprise software maker offers a low-code, no-code platform that businesses can quickly adopt for work management. Monday.com's products also make it possible to integrate other software that meet other business needs. In May, Monday announced the integration of its tools with Microsoft Teams.
Monday.com Targets AI Products
During the first quarter, Monday.com announced the launch of an AI Assistant and plans to open its platform for AI developers in June. The AI Assistant can create project and task plans besides composing email texts and summaries. Monday also has plans of using the tool to improve efficiency by identifying the best way to do tasks. The Israel-based company also plans on using AI internally to automate processes and reduce costs.
Monday.com has offices in Tel Aviv, New York, Chicago, London, Sydney and Tokyo. Its 186,000 customers span 200 countries.
Its customer base has grown as well. In the first quarter, enterprise customers grew 75% from the previous year to 1,683. Customers who accounted for more than $50,000 in annual recurring revenue increased to 28% from 22% over the year-ago period.
For the second quarter, the company forecast sales of $168 million to $170 million. For the full year, it expects sales of $702 million to $706 million. Analysts polled by FactSet expect sales of $169.3 million for Q2 with full-year estimates of $704.7 million. The EPS consensus estimate is also trending up.
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