Why Shares of Monday.com Stock Sank This Week

Published in Stocks and Investing on Friday, August 15th 2025 at 13:59 GMT by The Motley Fool
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Investors were disappointed with recent quarterly earnings.

Why monday.com Stock Took a Tumble This Week: A Deep Dive into Earnings, Market Reactions, and Long-Term Prospects

In the volatile world of tech stocks, few sectors have been as scrutinized as software-as-a-service (SaaS) platforms, where investor expectations often hinge on rapid growth and profitability milestones. This week, shares of monday.com (NASDAQ: MNDY), the Israeli-based work management software company, experienced a significant decline, shedding approximately 15% of their value since the start of trading on Monday. This drop came on the heels of the company's second-quarter earnings release, which, while beating some analyst estimates, failed to ignite the enthusiasm Wall Street had hoped for. As a research journalist covering the intersection of technology and finance, I've pored over the details to unpack what drove this sell-off and what it means for investors eyeing this high-growth player.

To understand the context, let's first revisit what monday.com offers. Founded in 2012, the company provides a versatile low-code/no-code platform that helps teams manage workflows, projects, and collaborations across various industries. Think of it as a customizable alternative to tools like Asana, Trello, or even parts of Salesforce, but with a focus on flexibility and integration. monday.com has built a reputation for empowering non-technical users to build apps and automate processes without needing deep coding expertise. This has fueled impressive growth, particularly among small to medium-sized businesses (SMBs) and increasingly larger enterprises. By the end of 2023, the company boasted over 200,000 customers worldwide, with a strong emphasis on recurring subscription revenue.

The catalyst for this week's plunge was monday.com's Q2 2024 earnings report, released after market close on Wednesday. On the surface, the numbers looked solid. Revenue came in at $236 million, marking a 34% year-over-year increase, which handily beat consensus estimates of around $228 million. This growth was driven by a combination of new customer acquisitions and expansions within existing accounts, with the net revenue retention rate holding steady at an impressive 112%. That means, on average, customers are spending 12% more with monday.com than they did a year ago—a key metric for SaaS companies indicating sticky, value-adding products.

Earnings per share (EPS) also surprised to the upside, with adjusted non-GAAP EPS of $0.64 against expectations of $0.52. The company continued its march toward profitability, posting a non-GAAP operating margin of 15%, up from 8% in the prior-year quarter. Free cash flow was another bright spot, generating $78 million, which underscores monday.com's improving financial health and ability to self-fund growth without relying heavily on external capital. CEO Roy Mann highlighted in the earnings call how the company's AI-driven features, such as automated workflows and predictive analytics, are resonating with users, contributing to higher adoption rates.

So, if the results were so positive, why did the stock sink? The answer lies in the forward guidance and broader market sentiment. monday.com's management provided Q3 revenue guidance of $242 million to $246 million, implying about 28% growth at the midpoint. While still robust, this represented a slight deceleration from the 34% seen in Q2 and fell short of some analysts' more optimistic projections of 30% or higher. Full-year 2024 revenue guidance was reiterated at $958 million to $964 million, equating to 31% growth, but investors seemed fixated on the perceived slowdown. In an environment where tech stocks are under pressure from rising interest rates and economic uncertainty, any hint of tapering growth can trigger a knee-jerk reaction.

Wall Street's response was telling. Several analysts, including those from Piper Sandler and Goldman Sachs, maintained their buy ratings but trimmed price targets slightly, citing concerns over macroeconomic headwinds like potential recessions that could crimp SMB spending. One analyst noted that while monday.com's enterprise push—targeting larger clients with more complex needs—is gaining traction, it might take longer to ramp up than anticipated, potentially pressuring short-term growth. The stock's valuation also played a role; trading at around 10 times forward sales before the drop, monday.com isn't cheap compared to peers like Atlassian or ServiceNow, which have faced similar valuation compressions.

Adding to the pressure was a broader market pullback in growth-oriented tech stocks this week. The Nasdaq Composite dipped amid renewed fears of inflation and geopolitical tensions, amplifying the sell-off in high-multiple names like monday.com. Competitors in the collaboration space, such as Smartsheet and Asana, also saw modest declines, suggesting this wasn't entirely isolated to monday.com but part of a sectoral rotation away from high-growth bets toward more defensive plays.

Despite the gloom, there are compelling reasons for optimism. monday.com's international expansion remains a key growth driver; non-U.S. revenue now accounts for over 60% of the total, with strong momentum in Europe and Asia-Pacific. The company's investment in AI, including features like monday AI Assistant for task automation, positions it well in a market increasingly demanding intelligent tools. Moreover, with a debt-free balance sheet and over $1 billion in cash reserves, monday.com has ample runway to weather economic storms and pursue strategic acquisitions, as it did with the 2023 purchase of a small AI startup to bolster its tech stack.

From an investor perspective, this dip could represent a buying opportunity for those with a long-term horizon. The company's total addressable market (TAM) in work management software is estimated at $50 billion and growing, driven by digital transformation trends. If monday.com can sustain its 30%+ growth trajectory while expanding margins toward 20% or more, the stock could rebound significantly. Historical precedents abound: SaaS darlings like Zoom or Shopify have endured similar post-earnings slumps only to soar as fundamentals proved resilient.

That said, risks persist. Intensifying competition from giants like Microsoft (with Teams and Planner) and Google (with Workspace integrations) could erode market share if monday.com doesn't innovate fast enough. Currency fluctuations, given its global footprint, and any slowdown in enterprise deals could further weigh on sentiment. Investors should monitor upcoming quarters for signs of reacceleration, particularly in customer acquisition costs and churn rates.

In summary, this week's decline in monday.com stock underscores the perils of high expectations in the SaaS space. While the earnings beat was overshadowed by cautious guidance, the underlying business remains strong, with a clear path to sustained profitability. For patient investors, the current valuation—now closer to 8 times forward sales post-drop—might offer an attractive entry point. As always, diversification and a keen eye on macroeconomic indicators will be crucial. Whether this marks a temporary setback or the start of a longer correction will depend on how monday.com navigates the evolving tech landscape in the months ahead. (Word count: 928)

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