Digital Transformation Will Expand Cloud Automation And Collaboration

Key Takeaways

• Cloud adoption and AI-driven analytics are driving sustained demand, higher customer retention, and greater revenue potential through expanded platform capabilities.
  
• Enterprise growth, successful new product launches, and AI-focused investments position the company for margin expansion and lasting competitive differentiation.
  
• Rising compliance costs, global economic uncertainty, and intensifying competition threaten margins and revenue, while operational shifts and workforce expansion may hinder long-term earnings growth.

Catalysts

Develops software applications in the United States, Europe, the Middle East, Africa, the United Kingdom, and internationally.

• monday.com is positioned to benefit from accelerating adoption of cloud-based workflow solutions as enterprises continue digital transformation initiatives, which expands the company's addressable market and supports double-digit revenue growth and long-term sustained demand.
  
• Increasing importance of data-driven decision-making and cross-platform integration in business processes is elevating the value of monday.com's AI-powered analytics and automation features, setting the stage for higher customer retention rates and expanded average contract values, which should positively impact operating margins and earnings.
  
• The launch and rapid uptake of new products such as monday service, which already commands the highest ACV across the product suite and strong cross-sell rates, signals significant headroom to increase average revenue per user and drive multi-product expansion, paving the way for both top-line acceleration and improved revenue visibility.
  
• Significant progress in the enterprise segment—reflected in record large-seat wins, enhanced platform scalability (with mondayDB 2.0), and a targeted upmarket sales focus—suggests there is major potential for larger deal sizes, longer contract duration, and meaningful expansion within existing large customers, all supporting stronger free cash flow and net income growth over time.
  
• Ongoing strategic investments in AI productization, headcount expansion in sales and product, and adoption of flexible AI consumption-based pricing models are expected to create durable competitive differentiation, enable higher gross margins, and open new monetization channels, setting up monday.com for margin expansion and outsized earnings growth as AI monetization matures.

monday.com Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on monday.com compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming monday.com's revenue will grow by 25.6% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 3.3% today to 7.1% in 3 years time.
• The bullish analysts expect earnings to reach $136.5 million (and earnings per share of $3.09) by about April 2028, up from $32.4 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 233.0x on those 2028 earnings, down from 429.8x today. This future PE is greater than the current PE for the US Software industry at 32.0x.
• Analysts expect the number of shares outstanding to grow by 3.19% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.07%, as per the Simply Wall St company report.

monday.com Future Earnings Per Share Growth

Risks

• Ongoing macroeconomic volatility and potential for economic stagnation, as noted in the discussion of choppiness and cautious outlook in Europe, could lead to enterprises curbing SaaS spending, negatively impacting future revenue and slowing ARR growth.
  
• Intensifying global data privacy regulations, coupled with increasing emphasis on digital sovereignty, may increase compliance and operational costs, potentially limiting international expansion and compressing net margins over time.
  
• A reliance on product-led growth and a still-maturing enterprise sales team, highlighted by the transition to more sales-led motion and recent CRO turnover, could cap enterprise monetization, limit upsell opportunities, and constrain long-term revenue and earnings growth.
  
• Rapid headcount growth and higher stock-based compensation, as indicated by the significant planned expansion in sales and R&D teams, may result in shareholder dilution, higher operating expenses, and pressure on long-term earnings per share.
  
• Competitive risks from commoditization in the work management software industry, as well as the rise of vertically integrated industry solutions and AI-powered automation from larger platforms like Microsoft and Google, could erode monday.com’s pricing power and undermine future revenue and margin expansion.

Valuation

• The assumed bullish price target for monday.com is $433.69, which represents two standard deviations above the consensus price target of $347.74. This valuation is based on what can be assumed as the expectations of monday.com's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $450.0, and the most bearish reporting a price target of just $265.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $1.9 billion, earnings will come to $136.5 million, and it would be trading on a PE ratio of 233.0x, assuming you use a discount rate of 10.1%.
  
• Given the current share price of $274.0, the bullish analyst price target of $433.69 is 36.8% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.