BofA cuts Monday.com stock price target on weak growth outlook

BofA Securities has decreased its price target on Monday.com Ltd. (NASDAQ:MNDY) stock from $105 to $90 while retaining a Neutral rating. The current share price stands at $79.93, which is lower than the revised target, and the stock has experienced a significant decline of about 52% in the past year. Despite this near-term setback, an InvestingPro analysis indicates that the stock may be undervalued, as it appears on their list of Most Undervalued stocks.

However, the company's third-quarter 2026 results were weaker than expected, and the firm reduced its fourth-quarter growth guidance by 120 basis points to 14.1%. This reduction is attributed to ongoing challenges in down-market segments, a lagging sales cycle, and restructuring disruptions that have hampered upmarket traction. Management anticipates that end-market softness and continued product and go-to-market changes will continue to impact growth throughout 2027, with a stabilization anticipated a few quarters hence.

The company reported an AI annual recurring revenue of $36 million at the end of the quarter, which accounts for roughly 2.4% of the total Annual Recurring Revenue (ARR), and usage metrics suggest a growing adoption rate. BofA Securities has lowered its revenue growth estimates for 2027 by 2.3 percentage points to 11.7%. However, the path to substantial growth uplift from AI products remains uncertain, as this contribution is still in its early stages, and the company is grappling with transitions in pricing, packaging, go-to-market strategy, and end-market focus.

Shares are currently trading at 1.5 times the 2027 estimated enterprise value-to-revenue and 7 times enterprise value-to-free cash flow, which may indicate that growth challenges are already factored into the stock price. The company demonstrates strong financial health, with an impressive 89% gross profit margin and a healthy 9% free cash flow yield.

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