Monday.Com Short Report

Investment Analysis Clubs Saul’s Investing Discussions
1

I’m trying to get a copy of Hedgeye’s short report that is calling for a 30% decline in MNDY. Ever since Lightspeed, I don’t poo poo these. They’re holding a call on Monday to spin this further. I think Monday has already proven them wrong if these are the points they’re going to make.

"Monday.com, a work management tool provider, has experienced significant growth in its core offering, achieving a 27% CAGR over four years and serving over 225,000 customers as of 2023. However, the company’s attempts to expand into new areas, such as CRM and developer-focused products, have had limited success, with low penetration rates and integration challenges.

In the long run, we don’t believe Monday.com will successfully bridge the gap from point solution to platform.

Meanwhile, in January 2024, Monday.com implemented a 20% price increase for new and existing customers. Over time, we believe this will lead to increased churn/seat reductions and negatively impact win rates on new business. Operating in a highly competitive market with low barriers to entry, Monday.com faces rivalry from established players in work management, CRM, and devops - ultimately positioning its core product as an add-on solution within a broader ecosystem."

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2

Thanks for the summary. With short reports, I look for things like:

  1. Is there fraud. Nope. CRM and developer software are fully functional and DO exist.
  2. Is there malfeasance. Nope. No reports of bad behavior by the C suite or the company as a hole.

So what’s Hedgeye’s thesis:

  1. CRM and Developer software will fail. I’m optimistic that this software will be at least a moderate success. Certainly the base software is well accepted and appreciated for its ease of use. If they make CRM and Developer software slightly better, this may be a good thing too. I’m holding to find out. If they do, I will course correct after an earnings report or two.
  2. The rolling price increase will cause churn. Because Monday believe’s they have pricing power, this is a bad thing. Really? Since when pricing power a bad thing? I think this argument is nonsense. I expect churn to remain normal and profits to increase proportionally to the price increase. The initial quarterly report after the price increase was by no means a disaster.
  3. There are low barriers to entry for competitors. I think this is a concern for most tech companies. We should always keep one eye out for competitors. This is standard diligence for anyone investing in the tech space.

I’m optimistically holding my 12.7% allocation. If I were looking at Monday.com today, I would happily open a 3% position. If the next earnings report looks good, then I would lean into MNDY and push my allocation up to 10%. I’m more comfortable staying pat with holdings until there is a clear change to the thesis. In my opinion, Monday is expanding where they should be expanding, and this report is simply trying to raise doubts before the new products have any chance to gain traction.

I think that this is a textbook situation where staying the course makes the most sense.

Best,

bulwnkl

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