JPMorgan says this resilient software stock can rally more than 25% even if the economy worsens

Published Mon, Dec 12 202210:32 AM ESTUpdated Mon, Dec 12 202211:10 AM EST

Monday.com has navigated a tightening economy well so far, JPMorgan said Monday, noting that the software stock's price is a good entry point for long-term investors. Analyst Pinjalim Bora upgraded the stock to overweight from neutral and increased his price target by $10 to $140. That reflects an upside of 27.5% over Friday's close. JPMorgan began coverage of the software publisher at neutral in May ahead of second-quarter earnings. Bora originally had concerns about what a worsening economic backdrop would mean for share value, though fears have been mitigated by recent performance. "Having seen the relative resiliency in the business in the face of a tough macro backdrop and the solid execution by management over the last two quarters, in addition to the stock coming back closer to our initial entry levels, we are now more comfortable moving to an overweight position," Bora said in a note to clients. Monday.com, which debuted at the Nasdaq in June 2021 , was part of a rash of companies that went public during the pandemic and are now beaten down in the bear market. Down 64.4% compared with the start of 2022, he said the stock is at an "attractive entry point" for long-term investors. The stock gained 8% on Monday. Bora said the company has not seen gross churn or significant downgrades over recent quarters despite having a relatively higher share of small and medium-sized businesses as clients. He said that bolsters the argument that Monday.com has a strong value proposition even as the economic picture sours. He also pointed to conversations with clients that show plans to increase work with the company going forward despite the broader industry anticipating falling demand amid economic tightening. Bora said the company could experience growth from opening up new operating system solutions for existing customers, monetizing products and releasing a back-end engine that will improve scalability. Compared with direct peers Smartsheet and Asana , Bora said Monday.com has the fastest revenue growth and an "elite" margin profile. He said that while he thinks the company will not be completely immune to a worsening economy, it "has done a great job navigating the environment till now." And he called Monday.com a "very solid company" that is aligned with both digital transformation and flexible work trends. — CNBC's Michael Bloom contributed to this report.