What Happened:
Shares of project management software maker Monday.com (NASDAQ:MNDY) fell 14.5% in the pre-market session after the company reported fourth-quarter results with revenue guidance for the next year that suggests a slowdown in growth (FY'2024 rev growth of 27.5% at the midpoint vs. 41% in 2023). In addition, operating income guidance for the same period was below expectations.
There are also macro challenges to contend with, and management sent a mixed message. "While economic and geopolitical challenges remain, we are highly confident in our ability to carry this momentum into FY24 and beyond, as we continue to focus on driving top-line growth and building market share." On the other hand, revenue and EPS exceeded expectations during the quarter. Revenue guidance for the next quarter also came in roughly in line with expectations. Overall, it was a mixed but weaker quarter, with guidance and macro negativity driving the stock performance.
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What is the market telling us:
Monday.com's shares are very volatile and over the last year have had 27 moves greater than 5%. But moves this big are very rare even for Monday.com and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 9 months ago, when the stock gained 12.1% on the news that the company reported a "beat and raise" quarter. First-quarter results exceeded analysts' expectations for revenue, gross margin, operating income, free cash flow, and earnings per share. Revenue guidance for the next quarter and full year also came in above Consensus, with the company raising the full-year guidance. Adding to the improved cash position, Monday.com enhanced its profitability with non-GAAP operating income at near break even. Likewise, the operating income margin guidance for the full year showed expectations of near break even.
Management highlighted the continued focus on profitability, adding that "the monday.com team is off to a strong start in 2023, with our results reflecting increasing customer demand for our Work OS platform and product suite, as well as our ongoing commitment to improving efficiency and profitability." The Q1 results were strong, with solid revenue growth and improved margins and cash position. Overall, it was a standout quarter compared to the mixed results from other tech companies, and this should cause investors to raise their projections.
Monday.com is up 21.1% since the beginning of the year, and at $215.95 per share it is trading close to its 52-week high of $235.92 from February 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 $1,204.
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