Monday.com Plunges 21% Despite Outstanding Q3 Results

Cloud-based project management software Monday.com Ltd. (MNDY) delivered outstanding third-quarter results. Both earnings and revenue exceeded estimates by a huge margin.

However, shares crashed 21.1% to close at $350.82 on November 10.

Outstanding Results

The company reported an adjusted quarterly loss of $0.26 per share, significantly better than analysts’ estimated loss of $0.60 per share. The company posted an adjusted loss of $0.81 per share in the same quarter last year.

Furthermore, revenue grew 95% year-over-year at $83.02 million, outpacing Street estimates of $74.69 million.

The company’s net dollar retention rate for customers with more than 10 users exceeded 130% in Q3, and the number of customers with $50,000 in annual recurring revenue (ARR) grew 231% year-over-year.

Management Comments

Commenting on the results, Eran Zinman, founder and co-CEO of MNDY, said, “Third quarter performance demonstrates that our platform’s unique low-code no-code technology is enabling more organizations to achieve their business goals by accelerating digitization, and creating a unified workspace.”

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Lock-up Release Date

The company announced that all outstanding ordinary shares, or securities convertible, or exchangeable for ordinary shares as of the initial public offering (IPO), will become eligible for sale in the public market effective November 12.

Guidance

Based on the accelerating business performance, Monday.com forecasts fourth-quarter revenue to be between $87 million and $88 million, against the consensus estimate of $77.15 million.

Additionally, the FY21 revenue is expected to be in the range of $300 million to $301 million, against the consensus estimate of $282.2 million.

Analysts’ View

Impressed with MNDY’s massive Q3 beat, analyst Bhavan Suri of William Blair said, “Monday’s results were fundamentally strong across the board as the company continues to execute. In our view, the 21% pullback in the stock is largely due to the stock run heading into the print (Monday was up over 15% the day before releasing earnings) and an early share lock-up expiration that will take place on November 12. As neither of these factors are related to the underlying fundamentals of the business, we view the pullback as a good buying opportunity.”

Suri has a Buy rating on the stock and sees plenty of potential growth drivers ahead. The analyst is encouraged by the company’s solid Q3 print and execution, and believes Monday.com is well-positioned for further upmarket traction, potential pricing power, user expansion with existing customers, and penetration of additional use-cases (in R&D, CRM, and others).

Overall, the stock has a Moderate Buy consensus rating based on 9 Buys, 1 Hold, and 1 Sell. The average Monday.com price target of $369.63 implies 5.36% upside potential to current levels. Shares have gained 96.1% over the past six months.

Website Traffic

TipRanks’ Website Traffic tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, offers insight into MNDY’s performance.

In October, Monday.com website traffic saw a 2.39% monthly decline in visits, against the same quarter last year. Similarly, year-to-date website traffic growth decreased 15.25%, against the same period last year.