The Bamboo Breakdown is here to feed the research nerd in you. Every week, we pick a stock or an event and do a deep dive into it. What does the company do? What are the key risks? What’s the Bull vs Bear case and so much more.
Today, we’re talking about Monday.com. Is it worth adding to your portfolio? We’ll take a deep dive and see what we find.
Monday.com is a cloud-based platform that allows companies to create their own work apps and work management software. Founded in 2012 by Roy Mann, Eran Kampf, and Eran Zinman, the product was launched in 2014 and in July 2019, the company raised $150 million, based on a $1.9 billion valuation. The company went public in June 2021 and is trading under the ticker MNDN.
Through its low-code or no-code technology, Monday.com gives companies the opportunity to develop their own work management software without any technical skills. Using simple drag-and-drop tools and commands, anyone in a company can create interactive dashboards to help make sense of data and tackle productivity problems. Having this all-in-one tool helps organizations avoid spending money on expensive software or engineering costs to build one.
As today’s offices increase in size, complexity, and ability to work from anywhere, an all-inclusive solution is needed to manage and coordinate an entire organization’s portfolio of different projects. These solutions help the management to shuffle between plans, workload, budgets, and resources, carefully observe the project progress and report on delivery success. Execution of work in a modernized & trackable way due to the pandemic has aided in the rise of demand for platforms of companies such as monday.com.
Competitors
Other companies offering similar services are Atlassian (TEAM) and Asana (ASAN).
Atlassian is an Australian software company that develops products for software developers, project managers, and other software development teams. The company was founded by Mike Cannon-Brookes and Scott Farquhar in 2002. Atlassian went public in December 2015 under the ticker TEAM, putting their market capitalization at $4.37 billion. The company’s focus is on development and management software but also has other similar software products thanks to a series of acquisitions of smaller companies from 2010 to date. Its most recent acquisition is Chartio, a cloud-based visualization, and analytics company.
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Asana is an American web and mobile application designed to help teams organize, track, and manage their work. It was founded by Facebook (FB) co-founder Dustin Moskovitz and ex-Google (GOOG), & ex-Facebook engineer, Justin Rosenstein in 2008. The product was launched commercially in April 2012 and by December 2018, the company was valued at $1.5 billion. Asana has some pretty big names investing in it – backers include Peter Thiel, co-founder of PayPal (PYPL), Mitch Kapor, creator of the open-source web browser Firefox, and former Facebook Director of Mobile, Jed Stremel. As of January 2018, Asana claims more than 35,000 paying customers, including eBay (EBAY), Uber(UBER), Overstock (OSTK), and IBM (IBM). The company went public in September 2020 and is trading under the ticker ASAN.
Key Advantages
The project management software industry has been a high-growth sector over the past couple of years. The industry is currently valued at $5.37 billion and is expected to reach $9.81 billion by 2026. That’s good news for Monday.com. Between 2019 and 2020, the company more than doubled its annual revenue from $78 million to $161 million. It is nearly on track to maintain that growth rate in 2021, as it reported $59 million in the first three months of the year, up nearly 85% from the same period in 2020.
Monday.com also has some pretty big backers. During its IPO, it attracted $75 million in funding each from Zoom (ZM) and Salesforce (CRM). Additionally, Monday.com raised $630 million in cash from its public offering. Post-IPO, this high-growth software firm will have over $800 million in cash and equivalents and zero debt, giving it a net cash position rivaling that of Atlassian and far more financial strength than Asana’s positive net-debt position.
Key Risks
The biggest area of concern for the company is its exorbitant sales and marketing costs. Sales and marketing costs have exceeded revenue in every quarter reported by the company since the middle of 2019. In Q1 2021, for instance, Monday.com generated $59 million in revenue with $63 million in associated sales and marketing costs.
Another area for concern is Monday.com’s enterprise value (market cap minus cash and equivalents) which is sitting at $8.2 billion. That’s a steep price tag for a software company that isn’t profitable yet. Even if the company can maintain its torrid pace of expansion, this will be a volatile stock prone to wild up-and-down swings in price. If that’s your kind of stock, then Monday.com may be for you.
Bottom Line
After all is said and done, Monday.com deserves more than a passing glance. Project management software is an important realm of the cloud industry, and though Atlassian is the leader on this front, the door is open for Monday.com to get in on the action.
So …
What did you think of the first Bamboo Breakdown? Did you like it?
That’s it from us.
See you next week!
1 Comment
Good morning… I just joined bamboo yesterday. I really find this breakdown insightful.