Rebranding itself to Monday.com (MNDY) from its former name, Dapulse, in 2017 proved a savvy move for the software maker. It set up Monday.com stock as the company expanded into social media marketing and online video advertising, saw strong customer growth and earned a well-received initial public offering.
XAnd MNDY stock has popped more than 160% since its June market debut.
The rebranding to Monday.com resulted from a survey, co-Chief Executive Roy Mann told Investor's Business Daily in a phone interview.
"The previous name sucked, especially with an English-speaking audience," Mann said. Meanwhile, for many people Monday is associated with the start of the workweek, which could be good or bad.
"Monday is essentially our vision," Mann added. "We wanted to be fun. When we did the survey, over half of the people saw Monday as a positive thing — as a fresh start, a new beginning, something to wake up for. We make work tools fun and empower people to change things. It (the rebranding) ended up being a really good decision."
Monday.com Stock: Building Up The Brand
The maker of project management software continues to build up brand awareness. That's key as it competes with Asana (ASAN), Smartsheet (SMAR), Atlassian (TEAM), Citrix (CTXS), Adobe Systems (ADBE) and Microsoft (MSFT), among others.
Monday.com's marketing strategy spans Facebook (FB) and Instagram, internet search engine optimization, online video advertising on YouTube, podcasts and plain-old billboard campaigns.
While the company name-change worked wonders, other factors have spurred Monday.com's stellar revenue growth. Sales popped 95% to $83 million in the September quarter amid strong demand for Monday.com's "no-code" software tools.
With the no-code tools, customers build applications tailored to their needs. Customers create custom apps using prebuilt, graphical, drag-and-drop programming tools instead of coded language.
And, Israel-headquartered Monday.com enables customers to integrate third party software into custom app development. Monday.com integrates software from Salesforce.com (CRM), HubSpot (HUBS), Zendesk (ZEN) and many others. Gmail, Slack, Microsoft Teams and other communications tools also can be integrated into custom apps.
"Monday's platform offers a good balance between ease of use and ability to scale to address more complex workflows," Baird analyst Bhavan Suri said in a recent note to clients.
MNDY Stock: Where Its Software Is Used
While Monday.com's software is most often used in project management, it's also used for customer relationship management, automating workflows, human resources, marketing and other business purposes.
"Monday's offering is more advanced than pure-play project management vendors in the market," Cowen analyst J. Derrick Wood said in his note to clients. "The no-code/low-code architecture is a disruptive platform that leverages building blocks to serve a variety of use cases."
Monday's marketing aims to drive potential customers to its website, where they can download its software for a trial period. Monday.com generates most revenue from subscription plans.
"The number of visits to Monday.com's main website has grown rapidly since the end of 2019 and is now higher than either of its two biggest competitors (Asana and Smartsheet)," Jefferies analyst Brent Thill said in a note.
The self-service business model has worked well with small- and medium-sized businesses. Monday.com in mid-2018 launched a direct sales strategy. It stepped up hiring of salespeople as it expanded into the enterprise market.
The software maker is gaining traction with larger customers, analysts say. In the September quarter, Monday.com added 143 net new customers with annual recurring revenue of more than $50,000 annually, up from the 41 new clients in the year-earlier quarter. That brought the total of those high-end customers to 613 as of Sept. 30.
Monday.com has not yet disclosed enterprise revenue, though.
MNDY Stock: Push Into Enterprise Market
Mann says he expects success in the enterprise market because Monday.com's software provides flexibility.
"With larger customers, we are winning deals because they know they will not hit a wall with us. Whatever problems they have in the future, they can use our building blocks (to develop apps). Other software is more rigid. They are vertical point solutions that solve a specific problem. We compete with them very well."
Founded in 2012, Monday.com raised $574 million in its June IPO, with shares priced at 155. Salesforce.com's venture arm and Zoom Video Communications (ZM) were pre-IPO investors in Monday.com stock.
Customers include Abbott, Electronic Arts (EA), Hulu, Oscar Insurance, Uber Technologies (UBER), Unilever and Universal Music Group.
Investors in software growth companies like Monday.com stock know that standout, top-line performance often comes with a trade-off — namely, lack of profitability. Monday.com lost 26 cents per share in the third quarter. In the current December-ending quarter, analysts model projects a wider loss of 52 cents per share.
For some software growth stocks, an inflection in free cash flow marks a turning point. In the third quarter, Monday.com generated an unexpected positive $3 million in cash flow vs. estimates for an $18 million loss.
Shares are near a buy zone out of a cup with handle with a Relative Strength Rating of 97 out of 99. MNDY stock was slightly up during Friday's morning action on the stock market today, but ultimately fell by the trading session's end. Shares dropped 6.8% to close at 371.25.
No Near-Term Profits
Monday.com management, though, was quick to caution analysts that high investments in sales and marketing as well as research and development will continue. So positive free cash flow will be short-lived.
"We don't aim — it is not a target for us to be cash flow positive in the near future or to generate cash," Chief Financial Officer Eliran Glazer said on the company's third-quarter earnings call. "Definitely, we are going to continue to invest aggressively."
In the third quarter, sales and marketing expenses came in at $67.4 million, or 73% of revenue on an adjusted basis. Research and development costs were $19.8 million, or 17% of revenue.
Heavy spending on marketing and advertising to generate sales leads makes sense because of the market opportunity, Mann said.
"We cast a wide net," he said. "Our target audience is really all information workers. It's everyone with a computer."
Lighthearted video ads aim to show "there are real people behind the software," Mann added. "We are approachable and provide world-class support."
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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