Why Monday.com Stock is Down 25% This Week
Key Points
Monday.com beat analyst expectations on both revenue and earnings but the stock still dropped 25% this week.
Management withdrew 2027 guidance, citing AI uncertainty and currency headwinds.
The selloff may be an overreaction and a potential buying opportunity.
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Shares of Monday.com (NASDAQ: MNDY) plunged this week, according to data from S&P Global Market Intelligence. From last Friday's market close to the closing bell on Feb. 12, the stock price fell 25%.
True to its name, Monday.com reported earnings early Monday morning. The report itself was better than expected, but the company disappointed investors with modest guidance for the next fiscal year.
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Great quarter, scary guidance withdrawal
Let's start with the basic financials. Monday.com's revenue rose 25% year over year, landing at $333.9 million. Adjusted earnings fell from $1.08 to $1.04 per diluted share. In both cases, Wall Street expected something worse. The analyst consensus pointed to earnings near $0.92 per share on revenue in the neighborhood of $329.5 million.
The results also exceeded the midpoints of Monday.com's guidance ranges, which aimed at revenue around $329 million and significantly weaker operating income.
However, management withdrew its existing 2027 guidance due to currency exchange headwinds and "the evolving nature of the AI landscape," according to conference call comments. Many investors saw this canceled guidance as a sign that AI agents are stealing Monday.com's business in the project management and online collaboration markets. The stock closed 20.1% lower that day and hovered around that lower level for the rest of the week.
Image source: Getty Images.
Is Monday.com sandbagging again?
This company has a history of setting modest guidance targets and hitting them out of the park with stronger real-world performance. Revoking longer-term growth goals would take the lowballing to a new level, but management projects roughly 18% revenue growth and 28% higher adjusted operating profits in 2026. Those are lofty growth targets.
And Monday.com is taking action against the potential AI challenge. The company offers its own AI agent platform, letting clients integrate multi-step AI tools in their Work OS applications. In the end, AI could be more of an opportunity than a threat for this innovative company.
I think the resulting price drop was an overreaction. If you don't own any Monday.com stock yet, this could be a good time to get started.
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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.
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