Why Monday.com Stock Is Having a Case of the Mondays

Monday.com (NASDAQ: MNDY) investors scrambled for more coffee on the morning of Monday, Nov. 10. The cloud-based app development and project management expert posted third-quarter results early in the morning, crushing Wall Street's estimates across the board. As a result, the stock opened Monday's trading 20.4% lower.

Wait, what?

Image source: Getty Images.

Monday's numbers look pretty good

Let's start with the usual headline figures. Monday's revenues rose 26% year over year, landing at $316.9 million. Adjusted earnings jumped 36% higher to $1.16 per diluted share. The Street consensus had pointed to earnings near $0.88 per share on sales in the neighborhood of $312.3 million.

However, management's guidance for the next quarter was less inspiring. The top end of the projected revenue range stopped at $330 million, well below the current consensus target at $333.8 million. A 23% sales-jump target wasn't enough when analysts were expecting something closer to 25%.

The guidance hangover hits different

Honestly, I don't see much wrong with this earnings report.

Monday is expanding its product portfolio, and new products accounted for more than 10% of the company's annual recurring revenue (ARR) in the third quarter. The new products include several artificial intelligence (AI) tools like the Monday Vibe app coding platform and the Agent Factory, where agentic AI programs can automate the client's business workflows.

A growing portion of Monday's clients are large-scale enterprise customers, free cash flows rose by 12%, and the cash-rich balance sheet remains free of burdensome debts.

So the price drop keeps circling back to the guidance targets. Top-line growth may slow down a bit, and free cash flows could fall as much as 10% year over year in the fourth quarter, as Monday is shifting its growth strategy away from online advertising and toward deeper enterprise-client relationships. Then again, Monday has a long history of setting low guidance targets and smashing them out of the park. This could be another example of that pattern.

This price drop looks like a reasonable next step in a long-term price correction. Monday's price-to-earnings ratio looks lofty at 218 today, but that's down from 800 in the summer of 2024, and trailing earnings were consistently negative before that. At this point, Monday's stock is exploring multiyear lows, down 42% in six months.

If you were waiting to buy Monday shares in a deep price drop, this could very well be the opportunity you were looking for. Either way, I feel like another cup of coffee after this analysis. Monday.com investors may feel the same way.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Monday.com. The Motley Fool has a disclosure policy.