MNDY: Piper Sandler Lowers Price Target, Still Overweight!

Introduction

Monday.com Ltd (NASDAQ: MNDY) – a work management software provider – has recently drawn attention after Piper Sandler slashed its price target from $250 to $170 (a 32% cut) while maintaining an “Overweight” rating (www.gurufocus.com). This mixed signal reflects caution about near-term growth alongside confidence in Monday.com’s longer-term prospects. The stock had already been under pressure (down ~40% over six months as of late 2025) due to slowing growth momentum (www.investing.com). Piper Sandler’s move came on the heels of Monday.com’s latest earnings, which showed revenue growth deceleration and conservative guidance. Despite this, Monday.com is emerging as a uniquely profitable player in the Software-as-a-Service (SAAS) space – a key reason Piper and other analysts remain positive on the stock even as targets come down (www.investing.com). Below, we dive into Monday.com’s fundamentals – its dividend policy, financial leverage, valuation, and the risks/red flags that investors should weigh in light of these developments.

Dividend Policy & Shareholder Returns

No Dividend: Monday.com has never paid a dividend on its ordinary shares and does not anticipate paying any in the foreseeable future (www.sec.gov). Management explicitly states that it intends to retain all future earnings to fund operations and expansion rather than return cash to shareholders (www.sec.gov). As a result, MNDY’s dividend yield is 0%, and income-focused investors should not expect any near-term payout.

Share Repurchases: While traditional dividends are off the table, Monday.com initiated an alternative shareholder return in 2025. In September 2025, the board approved a share repurchase program of up to $870 million (www.streetinsider.com). This sizable buyback (over 10% of the company’s market cap at the time) signals management’s confidence in the business and a willingness to return excess capital to shareholders. The repurchases – to be executed via open-market and other means (www.streetinsider.com) – can help offset dilution from stock-based compensation and take advantage of any undervaluation in the share price. Notably, Monday.com’s move to buy back stock is notable among high-growth tech firms and underscores its strong cash generation (discussed further below).

AFFO/FFO: Funds From Operations metrics are not applicable to Monday.com, as these are used for REITs or similar yield-oriented firms. Instead, the company’s cash-flow strength is better gauged by its free cash flow (FCF). Monday.com is a rarity among growth SaaS companies in that it generates significant free cash flow. For example, in Q3 2025, Monday.com produced adjusted free cash flow of ~$92 million, equating to a robust 29% FCF margin on revenue (ir.monday.com). Management guided full-year 2025 adjusted FCF of ~$332 million (a ~27% margin) (ir.monday.com) – indicating ample internally generated funds to fuel growth and potentially fund the new buyback program.

Leverage, Debt Maturities & Coverage

Balance Sheet Strength: Monday.com carries a highly liquid, debt-free balance sheet. As of year-end 2024, the company held $1.41 billion in cash and equivalents on its books (www.sec.gov) (www.sec.gov). It has also begun investing some excess cash into short-term marketable securities (~$50 million at 2024’s close, which grew to over $200 million by Q3 2025) (www.sec.gov) (ir.monday.com). Importantly, Monday.com has no traditional long-term debt outstanding – no bank loans, no bonds, and no convertible notes are listed on its balance sheet (www.sec.gov) (www.sec.gov). The company’s total liabilities (about $655 million at 2024 year-end) consist largely of operational items like accounts payable, accrued expenses, deferred revenue, and lease commitments (www.sec.gov) (www.sec.gov). Deferred revenue (payments received in advance for subscriptions) alone accounted for ~$342.6 million of liabilities, which represents obligations to deliver service rather than debt to repay (www.sec.gov). In short, Monday.com’s capital structure is very conservative, with shareholders’ equity funding the business and substantial cash reserves on hand.

Leverage & Maturities: Given the lack of interest-bearing debt, Monday.com’s leverage ratios are extremely low. Net debt is negative (net cash position of around $1.4 billion minus leases) and there are no major debt maturities to worry about in coming years. The only long-term liabilities of note are operating lease obligations for office facilities (about $77 million long-term portion at end of 2024) (www.sec.gov). Those lease payments are predictable and modest relative to the company’s cash flow. Essentially, Monday.com’s growth has been equity-financed (including its 2021 IPO proceeds) and supported by improving cash generation, avoiding the risks of leverage. This clean balance sheet gives Monday.com financial flexibility: it can invest freely in R&D and sales expansion, consider acquisitions, and weather economic downturns without creditor pressure.

Coverage: With no debt, traditional interest coverage metrics are a non-issue – there are virtually no interest expenses to “cover.” In fact, Monday.com is a net interest earner: it benefits from interest income on its large cash balance. In 2024 the company earned $55.5 million in net financial income (primarily interest on cash and securities) (www.sec.gov), up 32% from the prior year due to rising interest rates on its deposits (www.sec.gov). This interest income more than offsets any minor finance costs (like bank fees or lease interest). The result is that Monday.com’s interest coverage is effectively infinite – it faces no interest burden, and its operating cash flow covers all operating needs many times over. Even including lease commitments and other fixed charges, the company’s EBITDA and cash flows provide ample coverage. For perspective, Monday.com has generated positive cash from operations for four consecutive years since its IPO (www.sec.gov), indicating the business internally funds its obligations comfortably. Overall, liquidity and coverage are strengths: there is no solvency risk in sight given the current balance sheet.

Recent Performance & Valuation

Growth and Profitability: Monday.com is in a phase of strong growth, albeit with some deceleration as the business scales. In Q3 2025, revenue reached $316.9 million, up 26% year-over-year (ir.monday.com) (ir.monday.com). This growth rate, while robust, marked a slowdown from 33% YoY in Q3 2024 (ir.monday.com) (ir.monday.com). Importantly, Monday.com has been pairing growth with improving profitability. The company achieved its highest ever non-GAAP operating profit in Q3 2025 (ir.monday.com) (ir.monday.com). Non-GAAP operating income was $47.5 million (15% margin) in that quarter, up from $32.2 million (13% margin) a year earlier (ir.monday.com). On a GAAP basis, Monday.com nearly broke even with a small $2.4 million operating loss in Q3 2025 (just -1% margin, a dramatic improvement from -11% a year prior) (ir.monday.com). This progress underscores the operating leverage in the model as revenue scales and spending growth is kept in check. It’s also evidence of disciplined cost management – the company is managing to expand margins even while investing in new products (e.g. the launch of “monday campaigns” marketing tool in 2025) (ir.monday.com) and moving upmarket.

Cash Flow Strength: Monday.com’s economics shine even more in cash terms. SaaS companies often report losses due to high non-cash costs (like stock-based compensation) but can still throw off cash. Monday.com exemplifies this, with substantial free cash flow generation. For full-year 2024, the company’s net cash from operating activities was positive, contributing to a total adjusted free cash flow of $223 million in 2024 (approximately 32% of revenue) (ir.monday.com). In 2025, despite heavier hiring and marketing, Monday.com has maintained a ~30% FCF margin year-to-date (ir.monday.com). Management’s guidance for FY2025 calls for ~$1.227 billion revenue (26% growth) and ~$332 million in adjusted FCF (ir.monday.com) (ir.monday.com) – a ~27% cash margin. This combination of ~25%+ growth and ~25–30% free cash flow margins is exceptional, and Piper Sandler cited it as evidence of a “unique and profitable business model” in the sector (www.investing.com). In other words, Monday.com is achieving the coveted Rule-of-40 balance (growth + profit well above 40), which many SaaS peers struggle to attain.

Current Valuation: The market’s pullback in Monday.com’s shares has compressed its valuation multiples to relatively modest levels. As of early 2026, MNDY shares trade around the mid-$90s per share (www.gurufocus.com). This price equates to a market capitalization of roughly ~$5 billion and an enterprise value (EV) closer to ~$3.3–3.5 billion after net cash. Based on FY2025 projections, Monday.com’s stock is valued at approximately 2.5–2.8× EV/Sales and roughly 10× EV/FCF (a ~10% FCF yield). Such multiples are a far cry from the lofty ~15× sales many high-growth SaaS stocks commanded a couple of years ago. Even against peers today, Monday.com appears reasonably valued: for example, direct competitors like Asana and Smartsheet – which are growing slower and are less profitable – have traded in a similar low-to-mid single-digit sales multiple range. Traditional earnings-based metrics are just turning meaningful: Monday.com expects to post its first full-year GAAP profit soon (it recorded $34.5 million in pre-tax income in 2024 thanks to interest income offsetting operating losses (www.sec.gov) (www.sec.gov)). On a forward basis, if the company sustains margin expansion, its price-to-earnings could normalize rapidly. In essence, the stock’s current valuation reflects skepticism about sustaining growth, but also doesn’t fully credit Monday.com’s profitability strides.

Analyst Price Targets: Wall Street’s reaction to Monday.com’s recent results has been to temper price targets, reflecting the growth slowdown, even as most analysts remain bullish. Piper Sandler’s new $170 target still implies a ~80% upside from current levels (www.gurufocus.com), indicating they see the stock as undervalued now. Other brokers have also pared back expectations: for instance, after Q3’25, BofA cut its target to $195 (Neutral rating) and Oppenheimer to $200 (Outperform), citing more muted growth outlook (www.investing.com) (www.investing.com). Even the most optimistic targets (Jefferies’ $300, Needham’s $250) were adjusted downward post-earnings (www.investing.com). The consensus still views Monday.com positively – no major firm downgraded to a Sell – but clearly the company needs to re-accelerate growth or exceed its cautious guidance to regain a higher market multiple. Conversely, Monday.com’s demonstrated ability to generate cash and inch toward GAAP profitability provides a valuation floor in the eyes of supporters like Piper. The stock now trades at a valuation where it is being measured less on hype and more on fundamentals (revenue, margins, cash flow), which could present opportunity if management delivers steady execution.

Key Risks and Red Flags

While Monday.com’s financial profile is strong, investors should consider several risks and potential red flags:

- Growth Deceleration: The most immediate concern is slowing revenue growth. Monday.com’s own guidance implies ~22–23% YoY growth for Q4 2025 (ir.monday.com), which is below prior consensus (~25%) and well down from the 30%+ rates of 2022–2024. This deceleration triggered a ~12% post-earnings selloff in the stock (www.investing.com). Open question: Is this a temporary slowdown (due to macro or sales retooling) or a sign that the company’s core Work OS product is nearing saturation in some markets? If growth dips further into the low-20s% or teens, the stock’s narrative could shift significantly.

- Conservative Guidance: Management’s minimal raises to guidance have disappointed the market. After Q3 2025, Monday.com nudged its full-year revenue midpoint up by a mere $0.5 million (www.investing.com) – essentially signaling no material upside. This cautious outlook is unusual for Monday.com, which historically beat and raised estimates. The lack of a guidance raise (for the first time in its history, as Jefferies noted (www.investing.com)) raises a flag: it could indicate limited visibility or a recognition of headwinds (economic or competitive). If Monday.com consistently guides conservatively or fails to beat expectations, it may indicate underlying demand challenges.

- Longer Sales Cycles Upmarket: Monday.com is shifting focus to larger enterprise and mid-market customers, which has pros and cons. On the one hand, big clients bring higher annual contract values and stickier multi-product relationships. On the other hand, enterprise deals entail longer sales cycles and slower deal closes. Piper Sandler observed that Monday.com’s upmarket push has led to “longer sales cycles than the company has historically experienced” in those segments (www.investing.com) (www.investing.com). This can introduce lumpiness in quarterly bookings – a risk evidenced by a Q3 2025 bookings miss that some analysts flagged (www.investing.com). Investors should watch if the move upmarket continues to drag on near-term growth or sales efficiency.

- SMB Demand and Marketing “Choppiness”: Monday.com built much of its base with small and medium-sized businesses (SMBS) via frictionless online channels. Recently, however, SMB demand has been volatile. Piper Sandler noted “choppiness” in Monday.com’s Google AdWords performance, which affected SMB customer additions in the quarter (www.investing.com). This suggests that digital marketing efficiency – a key driver of low-touch sales – has fluctuated. If online ad markets (like Google search ads) become less efficient or more expensive, Monday.com might struggle to cost-effectively acquire smaller customers, or may need to curtail that spend, impacting growth. The company said this volatility “has reportedly stabilized” after Q3 (www.investing.com), but it remains a watch item. More broadly, macroeconomic weakness can hit SMB clients hardest, potentially increasing churn or reducing seat expansion in that cohort.

- Intense Competition: Monday.com operates in a highly competitive landscape of work management and collaboration software. According to its filings, competitors range from direct peers like Asana, Smartsheet, Notion, Atlassian (Trello) and ClickUp in project/work management, to CRM-focused platforms like HubSpot and Zoho, to software development tools like Atlassian’s Jira (www.sec.gov) (www.sec.gov). Many rivals are well-funded and entrenched. Larger players (e.g. Microsoft, Google) could also improve their work management offerings over time. Competition poses the risk of pricing pressure, feature copycats, and higher customer acquisition costs (www.sec.gov) (www.sec.gov). Monday.com’s ability to keep innovating (adding new products like Monday CRM, Monday Dev, Monday Projects, etc.) is crucial to maintain its edge. Failure to differentiate or the launch of a superior competing product could slow Monday.com’s growth or compress its margins. The company itself warns that competition is expected to increase and come from both startups and established tech giants entering the space (www.sec.gov) (www.sec.gov).

- Stock-Based Compensation & Dilution: As a fast-growing tech firm, Monday.com relies heavily on stock-based compensation (SBC) to attract and retain talent. This has two implications: dilution of shareholders and depressed GAAP earnings. For example, the difference between Monday.com’s GAAP operating loss and its non-GAAP operating profit in Q3 2025 was about $50 million (ir.monday.com) – largely due to excluding SBC. That suggests an annual SBC run-rate near $200 million, a significant expense. While SBC doesn’t drain cash, it issues new shares – Monday.com’s outstanding ordinary shares rose from ~48.9 million to ~50.8 million (+~4%) during 2024 (www.sec.gov), and continue to increase. The company’s $870M buyback plan can help mitigate this dilution, but investors should monitor share count and the impact of SBC on true profitability. High SBC could also indicate reliance on equity incentives to maintain growth, which isn’t sustainable indefinitely. Reducing SBC as a percentage of revenue will be important for Monday.com to achieve genuine GAAP profitability.

- Founder Control & Governance: One unique governance feature is that co-CEO Roy Mann holds a special “founder share” that grants veto rights over key decisions (www.sec.gov) (www.sec.gov). This founder share allows him to block any merger, acquisition or consolidation, as well as certain other major corporate transactions. While this provides stability and protects management’s vision, it also limits ordinary shareholders’ influence. For instance, an attractive buyout offer could be vetoed by the founder, even if a majority of public shareholders favor it (www.sec.gov) (www.sec.gov). This entrenchment risk means investors are essentially betting alongside the founders for the long run. The founder share could discourage unsolicited takeover bids (which might otherwise provide a quick premium) (www.sec.gov). Additionally, the company’s dual-CEO structure and concentrated insider control could pose succession risk – the business heavily depends on its two founders (Mann and Eran Zinman) and other key leaders (www.sec.gov) (www.sec.gov). The loss of either founder or key personnel may “harm our business,” the company warns (www.sec.gov) (www.sec.gov).

- Macroeconomic and Geopolitical Factors: Broader conditions could create headwinds. IT spending trends are crucial – if the economy weakens, companies might tighten software budgets, lengthen approval cycles, or seek to consolidate SaaS tools, which could hurt Monday.com’s new sales or renewal rates. Currency fluctuations also influence results (Monday.com sells globally; a strong dollar can weigh on growth in reported USD terms). Moreover, Monday.com has a major operational presence in Israel (R&D hub in Tel Aviv). Geopolitical instability or conflict in that region could pose talent and operational risks, as briefly manifested during late 2023 events. While the company is diversifying offices (New York, London, Sydney, etc.), this is a factor to watch in risk planning.

In sum, Monday.com’s risks revolve around maintaining its growth story in a maturing market and competitive field, and doing so with disciplined costs. Many of these challenges – longer enterprise sales, marketing volatility, competition – surfaced in recent quarters, prompting the cautious outlook and target cuts by analysts. How management navigates these will determine if Monday.com remains a high-flyer or sees its momentum further ebb.

Valuation & Open Questions

Given the above positives and risks, Monday.com presents an interesting case. The company’s fundamentals (cash-rich, growing ~25%, ~30% FCF margins) suggest a business of high quality, yet the stock’s valuation has compressed to a level typically reserved for much slower or shakier firms. Piper Sandler’s reaffirmation of Overweight at a lower $170 target encapsulates this duality: near-term growth expectations were too high and have been reset, but the long-term thesis remains intact (www.gurufocus.com). Investors are left with several open questions going forward:

- Can Growth Re-Accelerate or Sustain? A key question is whether Monday.com can stabilize its growth in the mid-20% range or re-accelerate it with new products and upmarket traction – or if it will erode further. The company surpassed $1 billion in ARR by late 2024 (ir.monday.com), a major milestone, but larger numbers are harder to grow at high rates. If large enterprises ramp up adoption (and SMB churn remains low), Monday could surprise to the upside. Conversely, if net dollar retention, currently ~111% (ir.monday.com), slips or new customer additions slow markedly, growth could grind below 20%, pressuring the valuation.

- Is Profitability the Next Driver? With GAAP break-even in sight and abundant free cash flow, Monday.com could pivot the narrative from growth-at-all-costs to profitable growth. In 2025 it expects a ~14% non-GAAP operating margin (ir.monday.com), and longer-term, margins could expand substantially (the company’s gross margin is high ~88%, and operating margin can rise as S&M efficiency improves). One open question: will Monday.com aim to boost margins further (delivering steadily higher earnings, which could warrant a higher P/E multiple), or prioritize re-investment to chase growth (which might keep GAAP profits thin)? The introduction of a buyback suggests a tilt toward harvesting some of its profitability for shareholders, but R&D and expansion remain priorities.

- How Will the $1.7B Cash Pile Be Used? Monday.com’s huge cash reserve (and ongoing cash generation) gives management options. Beyond the announced $870M buyback, the company could pursue strategic acquisitions to broaden its platform or enter new markets. Thus far Monday.com has mainly grown organically. An open question is whether it will become acquisitive – for instance, buying niche workflow tools or AI technologies – to accelerate growth. Alternatively, if organic growth suffices, will Monday.com return even more capital (perhaps future buybacks or eventually a dividend years down the road)? Management has not outlined a detailed capital allocation plan beyond the current repurchase, so investors will be watching how aggressively the buyback is executed and whether M&A becomes a lever.

- Competitive Moat and Platform Depth: Another question is how durable Monday.com’s competitive advantage is. The company pitches itself as a Work OS – a flexible, low-code platform that can be a backbone for many use cases (ir.monday.com). As it expands into CRM, dev ops, marketing, etc., can it truly succeed against specialized products in each category? Is Monday.com becoming a jack-of-all-trades platform that increases its value to customers, or does spreading into multiple niches dilute its focus? The answer will determine if Monday can upsell and cross-sell effectively (driving that net retention higher again) or if it faces pushback from best-of-breed point solutions. Investors should keep an eye on customer adoption of new products (management noted new products account for >10% of ARR in 2025 (ir.monday.com) (ir.monday.com)) and the competitive responses.

- Macro Resilience: Finally, there’s the broader economic question: how resilient is Monday.com’s model in a downturn? So far, growth has slowed but not cratered, and the company has managed costs well. With a high proportion of recurring revenue and a diversified customer base (~245,000 customers across industries as of 2024 (ir.monday.com)), Monday.com has some insulation. However, enterprise IT budgets and small business formations will influence its demand. If 2026–2027 bring a tougher economy, will Monday still grow double-digits and keep expanding margins? Or would it be forced into a major growth reset? The stock’s current valuation arguably prices in a degree of skepticism here, so outperformance on this front could drive upside.

Conclusion: Monday.com finds itself at an inflection point – transitioning from a hyper-growth work-tech newcomer to a more mature, profitability-oriented software firm. Piper Sandler’s lowered target reflects the recalibration of growth expectations, yet the continued Overweight stance speaks to Monday.com’s solid execution and financial health. The company’s lack of debt, strong cash flows, and improving margins give it resilience that many SaaS peers lack. However, sustaining investor enthusiasm will require reigniting growth drivers and proving that recent headwinds (longer sales cycles, subdued SMB momentum) are manageable side effects of scaling up. For investors, MNDY’s risk/reward appears more balanced now: the stock is no longer expensive by SaaS standards, but it must navigate competitive and macro challenges to unlock the kind of upside Piper Sandler and others envision. As always, execution is key – Monday.com will need to deliver consistent results (or positive surprises) to justify a higher valuation, while any missteps or further slowdown could invite additional skepticism. The next few quarters – and management’s strategic choices – will be critical in determining whether Monday.com can validate the bullish thesis underlying that $170 target, or if caution will prevail. Investors should stay tuned to see if Monday.com’s “Work OS” can continue to work its magic in the marketplace, or if Monday’s stock will need more time to recover its momentum.