JPMorgan Downgrades Monday.com to Neutral on Slowing Customer Growth

JPMorgan has downgraded Monday.com (NASDAQ: MNDY) to Neutral from a previous Overweight rating, citing significant headwinds in the company's ability to attract new customers and sustain its previously strong growth. The bank also adjusted its price target for the software firm.

The Downgrade in Detail

In a note to clients on Tuesday, JPMorgan analyst Samik Chatterjee set a new December 2027 price target of $87 for Monday.com, a slight reduction from its previous December 2026 target of $90. The downgrade follows a period of stock underperformance, with shares closing down 5.5% at $79.05 on Monday and falling a further 2.6% in premarket trading Tuesday.

Chatterjee stated that the decline in new annual recurring revenue (ARR) indicates the difficulty the company faces in maintaining its high growth rates. The bank expects these pressures to persist, partly due to potential disruption from a 20% workforce reduction implemented in July.

Key Headwinds Identified

JPMorgan highlighted several specific areas of concern that contributed to the ratings change:

Ad

• Slowing Metrics: Net dollar retention, a key metric measuring spending from existing customers, slipped to 109% in the second quarter from 110% in the first.
• SMB Weakness: The analyst noted that growth remains stronger among large customers spending over $100,000, suggesting the weakness is concentrated among newer and smaller clients. Partner checks point to longer sales cycles for small and mid-sized businesses (SMBs).
• Competitive Landscape: Customers in the SMB segment are reportedly taking longer to commit to spending as they evaluate products from emerging AI model developers.

AI Contribution and Valuation

While AI-related products accounted for 17% of new annual recurring revenue in the second quarter, they represented less than 1% of the company's total recurring revenue. According to Chatterjee, this contribution is "unlikely to move the needle on total company financials until it emerges to be a material driver for net-new ARR."

JPMorgan concluded that Monday.com's low valuation is unlikely to attract investors on its own, given that over 85% of its recurring revenue still comes from its core work management products. The bank stated it would need to see "a discernible change in down-market momentum" before adopting a more positive stance on the stock.