What Happened?
Shares of project management software maker Monday.com (NASDAQ: MNDY) fell 26.5% in the morning session after the company reported second-quarter results that beat analyst estimates but issued a weaker-than-expected revenue outlook for the third quarter. The main concern for investors was the company's third-quarter revenue guidance of $311 million to $313 million. The midpoint of this range fell just short of Wall Street's forecast and signaled a potential slowdown in growth. This overshadowed the company's revenue and profit beats in the second quarter. Adding to investor concerns, profitability weakened, with the GAAP operating margin falling to -3.9% from 0.8% in the same quarter last year. The company's free cash flow margin also decreased year on year to 20.1%. These negative forward-looking indicators and weakening margins prompted a significant sell-off in the stock, despite an otherwise solid quarter.
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What Is The Market Telling Us
Monday.com’s shares are very volatile and have had 28 moves greater than 5% over the last year. But moves this big are rare even for Monday.com and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 5 days ago when the stock gained 3.1% on the news that investment firm Baird upgraded the stock to Outperform from Neutral and raised its price target to $310. The investment firm pointed to the stock's recent decline as a compelling buying opportunity, noting shares had dropped 21% since July. Baird's analysts expressed growing confidence in the company's platform leadership, highlighting its potential to use its position in collaborative work management to deliver value with generative AI. The upgrade also arrived ahead of the company's second-quarter results, which Baird anticipated would be solid.
Monday.com is down 21.5% since the beginning of the year, and at $181.31 per share, it is trading 44.7% below its 52-week high of $327.92 from February 2025. Investors who bought $1,000 worth of Monday.com’s shares at the IPO in June 2021 would now be looking at an investment worth $1,014.
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