Key insights
- The author expresses a bullish outlook on Monday.com (MNDY), citing its strong cash position, negative churn, free cash flow generation, and share buyback program as reasons for a potentially undervalued stock. The author believes the company's low valuation relative to its recurring revenue base makes it an attractive acquisition target, supporting a positive outlook for the stock and potentially the broader software sector.
Software stocks have been taking heavy hits amidst the AI scare, but Monday is likely one of the most beaten down out there based on fundamentals.
Monday has a market cap of 3.5 billion, however it also has 1.6 billion in cash, making the business worth around 1.9 billion.
Its customer base, spread around SMBs, midsize businesses and enterprise has negative churn meaning customers spend more each month on the product showing its stickiness.
The business also generates 330 million in free cash flow, meaning it is trading at around 6x FCF, a tremendously low valuation for a software business with a recurring revenue base, which must have PE acquirers already circling, leading to the CEO’s comments on a podcast recently they would rather not sell.
Monday also has a share buyback program running, with 170 million out of a 700 million authorization already completed.