What Happened?

Shares of project management software maker Monday.com (NASDAQ:MNDY) fell 18.3% in the morning session after the company reported underwhelming third-quarter financial results, with sales in line with analysts' estimates. Similarly, revenue guidance for the next quarter was also mostly in line with expectations. Notably, the muted sales guidance for the next quarter implied revenue growth of around 28-29%, suggesting growth may be slowing. 

Monday.com also announced a change in leadership. Yoni Osherov, monday.com's Chief Revenue Officer (CRO), is expected to step down from his role at the end of December 2024. With the company still in search of his replacement, there is an added element of uncertainty that markets have to contend with. It isn't hard to understand why markets might struggle to digest this news, as Osherov was considered pivotal in the company's growth, helping to increase ARR (annual recurring revenue) from $10 million to over $1 billion. 

On a more positive note, earnings (non-GAAP EPS) beat Wall Street's estimates as gross margin ticked up slightly relative to the previous year while operating margin was in line. 

Overall, this was a mixed quarter, with the stock's reaction suggesting that markets are growing agitated by the decelerating top line growth and the uncertainty caused by the leadership update.

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What The Market Is Telling Us

Monday.com’s shares are quite volatile and have had 17 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 biggest move we wrote about over the last year was 6 months ago when the stock gained 23.8% on the news that the company reported a 'beat and raise' quarter. Monday.com materially improved its net revenue retention. Its revenue also outperformed Wall Street's estimates. 

Looking ahead, the company raised its full year guidance across the board. The full year operating profit raise was particularly large, showing that the business is more profitable than expected. Overall, this quarter's results were great and shareholders should feel optimistic.

Monday.com is up 52.4% since the beginning of the year, but at $271.50 per share, it is still trading 16.3% below its 52-week high of $324.31 from November 2024. 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 $1,516.

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