Monday.Com (MNDY): A Mid-Cap Growth Star Shining with AI-Driven Innovation
We recently published a list of 16 Best Mid Cap Growth Stocks To Buy Now. In this article, we are going to take a look at where Monday.Com Ltd. (NASDAQ:MNDY) stands against other best mid cap growth stocks.
50 Basis Point Reduction: Exaggeration or Hidden Benefit?
Recent discussions among financial strategists emphasize the current stock market dynamics, particularly regarding the upcoming US elections. Investors are encouraged to view dips in stocks of some sectors as long-term buying opportunities, as historical trends suggest that 10% corrections can be advantageous entry points.
While recent sell-offs were driven by sector-specific issues rather than broader economic concerns, the long-term outlook remains positive. Despite recession worries, the US economy is stable, with strong consumer performance and corporate profits exceeding expectations. This has contributed to a rebound in the NASDAQ and S&P 500.
Inflation has reportedly dropped to a three-year low of 2.6% in August, marking the lowest rate since March 2021. As inflation continues easing, there has been ongoing speculation that the Fed may begin cutting interest rates, potentially starting with a 25 basis point reduction.
Market analysts, including Gene Goldman and Craig Johnson, anticipate multiple rate cuts due to slowing inflation and economic growth. We discussed this earlier in our article about the 12 Best Small Cap Tech Stocks to Buy. Here’s an excerpt from it:
“Gene Goldman expressed that his base case anticipates 3 rate cuts of 25 basis points each, beginning in September. His belief lies in the slowing inflation, a deceleration in economic growth, and the overall resilience of the economy, which he thinks is not as dire as some reports suggest. Goldman noted that while the labor market showed mixed signals, with both positive and negative data, the market’s expectations for deeper rate cuts may be exaggerated….
Craig Johnson was also of the opinion that a 25 basis point cut is already anticipated by the market, suggesting that a 50 basis point cut could raise concerns among investors. He believes that a series of 25 basis point cuts would align with their perspective. Craig emphasized the importance of staying calm considering that, historically, October has been a strong month for the markets, with gains observed 86% of the time since 1929.”
However, on September 16, Erika Najarian, UBS senior equity research analyst, mentioned that small and mid-cap stocks could potentially benefit from a 50 basis point cut.
Najarian attributes the recent underperformance of financial stocks to market concerns about the implications of potential rate cuts for economic stability, leading investors to question a less favorable economic outlook. She believes some anticipated cuts may already be reflected in money center bank stock prices due to their strong year-to-date performance. A 50 basis point cut could especially benefit mid-cap stocks affected by commercial real estate issues.
She explains that a 50 basis point cut would significantly impact net interest income. Money center banks benefit more from rising rates, while mid-caps are liability-sensitive and may see deposits repriced faster, favoring them if rates are cut aggressively.
The recent Basel III news with lower capital thresholds triggered negative stock reactions, exacerbated by JPMorgan’s comments on reduced investment banking and trading growth targets. Factors included ongoing Basel III discussions since December 2023 influencing pricing, a leading bank suggesting consensus net interest income expectations are too high, casting doubt on other banks, and emerging signs of consumer weakness potentially spreading beyond lower-income segments.
Najarian highlights the challenges analysts face in predicting net interest income due to shifting rate expectations. While higher rates have traditionally benefited bank profitability, potential cuts create uncertainty about financial performance. She points out that banks must choose between cutting rates to remain competitive or maintaining volume, complicating forecasts for net interest income.
As Najarian emphasizes the uncertainty surrounding interest rate cuts and their effects on the financial sector, and investors await clarity from the Fed, we’re bringing you a list of the 16 best mid-cap growth stocks to buy now.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Software engineers collaborating on a project while seated in a shared workspace.
Monday.Com Ltd. (NASDAQ:MNDY)
Market Capitalization as of September 13: $12.75 billion
Number of Hedge Fund Holders: 43
Monday.Com Ltd. (NASDAQ:MNDY) is a cloud-based platform that allows users to create their own applications and project management software. It offers a visual platform that helps teams of all sizes manage projects, collaborate, and automate workflows, and has a user-friendly interface and the ability to be customized.
The company’s mondayDB platform launched its mondayDB 2.0 version, which is meant to elevate scalability, enabling customers to manage boards with up to 100,000 items and linked items, and dashboards with up to 500,000 items.
AI is integrated across all areas of Monday.Com Ltd. (NASDAQ:MNDY). In mid-2023, the company deployed a third-party GenAI chatbot for managing chat-based customer service tickets, yielding impressive results. The chatbot has resolved around 50% of customer service tickets automatically. This initial success led to an increase in chat ticket volume and reduced the reliance on external support for ticket management.
In the second quarter of 2024, it introduced new GenAI features to the monday platform, including auto-generated action items, threat summaries, and enhanced text extraction capabilities. It also launched a portfolio solution for enterprise work management. The latest product, monday service, is now in beta and is scheduled for full release by the end of 2024.
Revenue was $236.11 million, up 34.40% year-over-year due to the recent pricing update and strong demand for the Work Operating System products.
Monday.Com Ltd. (NASDAQ:MNDY) has made remarkable strides since its NASDAQ debut in 2021, evolving into a comprehensive platform together with the integration of AI features. Its growth potential makes it one of the top mid-cap stocks to buy now.
Next Century Growth Small Cap Strategy stated the following regarding Monday.com Ltd. (NASDAQ:MNDY) in its first quarter 2024 investor letter:
“Monday.com Ltd. (NASDAQ:MNDY) provides a next generation software platform for companies to run many key aspects of their businesses, such as managing project tasks and workflows, product development, and sales CRM (customer relationship management). MNDY has had success selling into small and medium size businesses and is having increasing success further up market. Revenue growth is currently in the 30% range and the company has proven they can operate profitably and generate solid free cash flow.”
Overall, MNDY ranks 13th on our list of best mid cap growth stocks to buy now. While we acknowledge the potential of MNDY as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MNDY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.