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Hot IPO Stock Sets Up New Buy Point After 175% Run

Recent IPO Monday.com (MNDY), featured in today’s IBD 50 Stocks To Watch, is building a new base after rallying 175% from a prior buy point.




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The Israel-based company’s Work OS open platform lets businesses build software and work management tools to meet their needs. Work OS is used by over 127,000 customers in more than 190 countries, according to Monday.com.

And there may be more room to expand.

“Our Work OS is broadly applicable for any organization and team across a growing number of use cases,” co-CEO Eran Zinman said on the Aug. 17 earnings call. “According to estimates from IDC, our total addressable market was $56.1 billion in 2020 and will grow to $87.6 billion in 2024.

“Further, we believe our Work OS platform is applicable across the 1.25 billion information workers that industry analysts estimate exist globally.”

Monday.com beat Wall Street targets in Q2. It reported a loss of 26 cents per share on revenue of $70.6 billion. Analysts expected a loss of $1 a share on revenue of $62.1 million. The company ended the quarter with 470 enterprise customers, a 226% increase from 144 a year ago.

For Q3, analysts forecast a loss of 60 cents a share on nearly $74.7 million in revenue. Monday.com is slated to announce results Nov. 10 before the open.

Stocks To Watch: Strong Technicals

IBD Stock Checkup assigns Monday.com a 71 Composite Rating, which gives investors a quick way to gauge a stock’s key growth traits. That puts it in the top third of the 112-stock enterprise software group, which includes Digital Turbine (APPS), Salesforce.com (CRM) and Shopify (SHOP).

Monday.com’s composite score falls short of the ideal 90 minimum of top growth stocks. Much of that is because the Israel-based company hasn’t turned an annual profit yet — which explains a 20 Earnings Per Share Rating. It lost money the past two years, with analysts expecting bigger losses this year and next.

Revenue growth has been strong, coming in at 85% or higher the past six quarters. That’s one reason it makes the IBD 50.

But the stock excels on the technical side, helping make it one of the top stocks to watch right now. A 97 Relative Strength Rating places Monday.com in the top 3% of all stocks. Its relative strength line, which compares a stock’s performance vs. the S&P 500, is close to recent highs. A move to new highs at or ahead of a potential breakout would be a bullish sign.

Monday.com came out of the gate strongly in its June 10 debut. It closed near 179 on its first trading day, after pricing at 155. The stock rallied 79% from a 237.60 buy point of an IPO base and is now consolidating again. Shares are about 15% away from a new consolidation entry of 425.94, according to MarketSmith chart analysis. The stock also is finding support at its 10-week moving average.

Follow Nancy Gondo on Twitter at @IBD_NGondo

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