Monday.com stock price target lowered to $290 at TD Cowen on SMB weakness

monday.com (MNDY) shares have declined over 30% following mixed second-quarter results, primarily due to pressure on its small and medium-sized business (SMB) segment stemming from Google's AI search shift, despite a healthy enterprise segment and strong 89.5% gross margins. This performance has prompted multiple analyst firms, including TD Cowen, Piper Sandler, and Morgan Stanley, to lower their price targets, reflecting varied sentiments on the company's growth outlook, with some noting a valuation disconnect while others remain cautious on the persistent SMB headwinds.

Analysis

monday.com (MNDY) has experienced a significant valuation reset, with its stock declining over 30% in the past week following the release of mixed second-quarter results. While the company reported a 27% revenue growth, representing a 1.8% beat, this fell short of its trailing twelve-month average beat of approximately 2.5%, signaling a potential deceleration. The core issue stems from its small and medium-sized business (SMB) segment, which is facing headwinds attributed to Google's strategic shift toward AI search. This external pressure contrasts sharply with the health of its Enterprise segment, which posted record net customer additions. Despite the challenges, the company's fundamentals remain robust, featuring an 89.5% gross profit margin and a balance sheet with more cash than debt. However, the forward-looking picture is nuanced; while monday.com slightly raised its fiscal year 2025 guidance, analysis from TD Cowen suggests the constant currency outlook was effectively lowered by 50 basis points. This mixed performance has prompted a wave of price target reductions from firms including TD Cowen, Piper Sandler, Morgan Stanley, and Wolfe Research, reflecting a broad-based recalibration of expectations, though some analysts maintain 'Buy' or 'Overweight' ratings, citing that the sell-off has created a valuation disconnect relative to its growth profile.

Key Decisions for Investors

• Given the sharp 30% share price decline, investors may find an attractive entry point based on a potential valuation disconnect, with the stock trading at approximately 20 times estimated 2026 free cash flow, provided they have strong conviction in the durable growth of the enterprise segment.
• It is critical to monitor the impact of Google's AI search evolution on the company's small and medium-sized business segment, as continued pressure in this area remains the primary headwind and could undermine the recently raised full-year guidance.
• The uniform reduction in price targets across multiple sell-side firms, even from those maintaining bullish ratings, signals a reset in market expectations; investors should recalibrate their models to account for the heightened SMB risk before initiating or adding to a position.