Why the Monday.com IPO Should Be on Your Radar

The Monday.com IPO will happen any day now. Some of the biggest whales in the software as a service (SaaS) field want in.

Both Salesforce.com Inc. (NYSE: CRM) and Zoom Video Communications Inc. (NASDAQ: ZM) will buy $75 million worth of shares each once Monday.com stock becomes available.

And truly, Monday.com couldn't have chosen a better time to go public.

In 2018, only 7% of civilian employees worked from home. Now, even as people get vaccinated and the economy opens up, 26.7% of people still work remotely in 2021.

Remote work was a key driver in doubling revenue for Monday.com last year. And it's not going away just because the pandemic is over.

In total, Monday.com wants to sell 3.7 million shares in the price range of $125 and $140.

We saw the company valued at $2.7 billion after a funding round in 2020. But the company expects a valuation of more than $6 billion at its IPO.

That would be more than double-growth in a year. And yes, it has the numbers to back that up.

Here's why Monday.com could be the best stock to buy in 2021.

What Is Monday.com?

Monday.com is an office collaboration platform that helps teams manage projects and track tasks. It is billed as customizable for any team, with prebuilt automation tools and the ability to integrate with apps outside the platform.

Initially, the product was created as an internal tool for employees at Wix.Com Ltd. (NASDAQ: WIX), the website building company. But in 2012, CEO and former Wix employee Roy Mann took the company independent.

This company has since received substantial backing over a short time. In just around five years, it went from $1.5 million in early seed funding to raising $150 million in 2019 and being valued at $1.9 billion.

In 2020, Monday.com reported it had 100,000 commercial clients and won the Webby Award for productivity apps.

Its tools offer a super-smooth teamwork and task tracking experience that most offices can benefit from. And it's not crazy to think most offices would eventually adopt the platform...

Is Monday.com Profitable?

Monday's model is cloud-based software as a service. Revenue comes in the form of subscriptions, which means investors can potentially reap profits even if the market becomes fully saturated.

Monday.com saw its annual revenue double in 2020, from $78 million to $161 million. This could likely have been due to the wave of stay-at-home work prompting a need for more hands-on task management. But this trend won't die with the pandemic.

But Monday.com could be on track to maintain the same growth rate in 2021. The company reported $59 million in the first three months of 2021, which was up 85% year over year.

It also reported nearly 128,000 customers in over 190 countries by the end of March 2021.

Seventy-six of its customers paid more than $50,000 in annual recurring revenue for the company in 2019. In 2020, that number grew to 264 clients paying more than $50,000 annually.

A major reason Monday.com is not yet profitable is that it's piling so much money into marketing efforts. Last year, the marketing budget exceeded revenue, with $63 million in spending over revenue of $59 million.

Still, heavy marketing and sales spending this early is quite common for young companies, especially in software.

Here's the big picture and why Monday.com could be one of the biggest buys of 2021.

Should You Buy Monday.com Stock?

Monday.com is only about seven years old, so it's safe to say it is in a "growth phase." More than that, it could make sense for a subscription-based SaaS company to focus on gaining new customers at a net loss. If it knows that it can keep those subscriptions in the long run, the short-run loss presents less of an issue.

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That's why the increase in customers paying over $50,000 annually is such a key number. It shows that not only is the company growing its customer base, it's upselling customers and satisfying them with the product.

People may argue how many similar apps to Monday.com exist, with nothing to really differentiate it. But those voices will chime in wherever a company makes quality products and goes the extra mile to create a flashy brand.

Exhibit A in that regard is Apple Inc. (NASDAQ: AAPL). From its inception to this very day, PC folks dismiss it as a "marketing" company and say its products are equal to PC products at best. But Apple keeps selling products and pumping its bottom line.

Another example is Bitcoin. Bitcoin bears will say that the coin doesn't have enough compelling function to differentiate itself from other coins, either downplaying the protocol's security or decentralization.

No matter which side you fall on in the Bitcoin or Apple debates, everyone should understand the power of first-mover advantage.

Even if Monday.com is the most run-of-the-mill product, it stands to dominate market by grabbing as many eyeballs as possible.

But the bottom line is that Monday.com does not sell a run-of-the-mill product. The platform is extremely easy to use - and even a little fun, I would say, from personal experience. And there is no better proof of this than its growing client list.

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About the Author

Mike Stenger, Associate Editor for Money Morning at Money Map Press, graduated from the Perdue School of Business at Salisbury University. He has combined his degree in Economics with an interest in emerging technologies by finding where tech and finance overlap. Today, he studies the cybersecurity sector, AI, streaming, and the Cloud.

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