This Software Stock Is Down 35% but Here's Why It Just Became a $4 Million Bet

On November 13, Montreal-based Formula Growth disclosed a new position in monday.com (NASDAQ:MNDY), acquiring 20,000 shares valued at nearly $3.9 million during the third quarter, according to an SEC filing.

What Happened

According to a filing with the Securities and Exchange Commission dated November 13, Formula Growth reported establishing a new equity stake in monday.com (NASDAQ:MNDY). The fund added 20,000 shares, resulting in a quarter-end position valued at nearly $3.9 million.

What Else to Know

The new stake in monday.com accounts for 1.4% of Formula Growth’s reportable AUM.

Top holdings after the filing:

• NASDAQ: SWIM: $7.53 million (2.7% of AUM)
• NYSE: JHX: $7.24 million (2.6% of AUM)
• NASDAQ: TEAM: $6.39 million (2.3% of AUM)
• NASDAQ: SSYS: $6.38 million (2.3% of AUM)
• NASDAQ: MU: $6.36 million (2.3% of AUM)

As of Friday, shares of monday.com were priced at $147.08, down 35% over the past year and well underperforming the S&P 500, which is up 16.5% in the same period.

Company Overview

Company Snapshot

• monday.com offers a cloud-based Work OS platform for work management, project coordination, CRM, and software development, serving a broad range of business needs.
• The company targets organizations of all sizes globally, including enterprises, educational institutions, government agencies, and business units seeking workflow automation and collaboration tools.
• Its revenue model is primarily subscription-based, with additional income from professional services and support.

monday.com provides a cloud-based Work OS platform that enables organizations to manage work and create software applications for various business needs. It serves organizations internationally through its cloud-based platform, supporting workflow automation and collaboration across industries.

Foolish Take

This is a portfolio that spreads risk across dozens of names, with top holdings clustered around the 2% to 3% range. A 1.4% allocation signals interest without urgency, suggesting this is an early-stage conviction that still needs proof. In that context, the timing is telling. The stock has been out of favor, sentiment has cooled, and expectations have reset.

The fundamentals, however, are moving in the opposite direction. In the third quarter, monday.com reported revenue of $316.9 million, up 26% year over year, while non-GAAP operating income climbed to $47.5 million and margins expanded to 15%. Free cash flow was strong at $92.3 million, and the company ended the quarter with more than $1.5 billion in cash. Customer expansion continues to skew upmarket, with the number of customers spending more than $100,000 annually rising nearly 50% year over year and remaining performance obligations jumping 36% to $747 million.

For investors whose interest has been piqued, this is a bet that a profitable, cash-generating SaaS platform with improving enterprise penetration might eventually get revalued, even if the stock stays volatile in the meantime.

Glossary

Initiated a new position: When an investor or fund buys shares of a company for the first time.

Assets under management (AUM): The total market value of investments managed on behalf of clients by a fund or firm.

Reportable holdings: Investment positions that must be disclosed in regulatory filings due to their size or significance.

Equity stake: Ownership interest in a company, represented by holding its shares.

Trailing twelve months (TTM): The 12-month period ending with the most recent quarterly report.

Compound annual growth rate (CAGR): The average annual growth rate of an investment over a specified period, assuming profits are reinvested.

Work OS: A cloud-based platform designed to manage workflows, projects, and collaboration across an organization.

Quarter-end position: The number of shares or value of an investment held at the end of a fiscal quarter.

Reportable assets: Investments that meet regulatory thresholds requiring disclosure in official filings.

Cloud-based platform: Software or services hosted online, accessible via the internet rather than installed locally.

Filing: An official document submitted to a regulatory agency, often disclosing financial or investment information.

Holdings: The securities or assets owned by an investor or investment fund.

Jonathan Ponciano has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Atlassian, Monday.com, and Stratasys. The Motley Fool has a disclosure policy.