monday.com (MNDY) Following IBM Warning Is The Software Story Now Priced In
IBM’s second quarter earnings warning, which points to tighter enterprise software budgets and higher hardware spending, quickly pressured monday.com (MNDY) stock, even though the company’s underlying business growth and earnings expectations have remained relatively stable.
See our latest analysis for monday.com.
The IBM warning added pressure to a stock that was already weak, with monday.com’s share price down 42.94% year to date and the 1 year total shareholder return falling 71.20%. This followed a 25.08% 3 month share price gain that suggested some stabilising momentum before this latest pullback.
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monday.com now trades at a clear discount to both analyst targets and some intrinsic value estimates after the IBM shock. Is the market sensibly pricing in software risk, or leaning too far into caution, as the valuation section shows next?
Most Popular Narrative: 24.3% Undervalued
Compared with monday.com’s last close of $81.84, the most followed narrative points to a fair value of $108.13, setting up a clear valuation gap that hinges on how its AI work platform story plays out.
Rapid integration of generative AI and low-code/no-code capabilities (e.g., Monday Magic, Vibe, Sidekick) enable broader automation and workflow customization, strengthening platform differentiation and stickiness, which is likely to improve customer retention, ARPU, and net margins as monetization scales.
Curious what kind of revenue expansion, margin reset, and future earnings multiple are baked into that fair value number? The narrative leans on a specific growth path, a thinner profit margin profile, and a much higher future valuation multiple than today, all working together in a tight set of assumptions that could surprise many investors.
Result: Fair Value of $108.13 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, the monday.com narrative also assumes that elevated R&D and sales spending eventually pays off, and that competition in workflow and AI tools does not compress pricing power.
Find out about the key risks to this monday.com narrative.
Another View: monday.com on Earnings Multiples
The narrative and intrinsic value work up make monday.com look 24.3% undervalued, but the earnings multiple tells a more cautious story. At a P/E of 29.4x, the stock trades slightly above the US Software industry at 28.9x and well above its own fair ratio of 19.2x.
That gap suggests the market is already paying a premium for monday.com relative to what the fair ratio implies, even after the recent share price pullback. If sentiment or earnings forecasts reset further, investors need to ask whether this premium narrows toward 19.2x or holds up.
See what the numbers say about this price — find out in our valuation breakdown.
Next Steps
If this mix of caution and optimism around monday.com leaves you undecided, review the data promptly and form your own stance with 3 key rewards and 1 important warning sign.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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