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What Happened:Shares of project management software maker Monday .com (NASDAQ:MNDY (NASDAQ:MNDY))
fell 6.72% in the morning session after the yield on the benchmark 10-year Treasury bond topped 5% for the first time in over 15 years. Even with relatively decent inflation readings as of late, this could mean higher rates for longer, which would make it more costly for consumers to take out mortgages and hold credit card debt while making it more expensive for businesses to take out bank loans to fund investments and projects. As a reminder, higher rates hurt equity valuations because a company’s stock price is essentially the present value of its future cash flows discounted at a discount rate. The higher the prevailing interest rate environment, the higher the discount rate. Additionally, these dynamics are more detrimental for growth stocks (like tech names) as more of the company’s value is prescribed to its long-term potential.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Monday.com? Find out by reading the original article on StockStory.
What is the market telling us:Monday.com’s shares are very volatile and over the last year have had 41 moves greater than 5%. In context of that, today’s move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. The biggest move we wrote about over the last year was 5 months ago, when the company 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 10.1% since the beginning of the year, but at $131.63 per share it is still trading 29.5% below its 52-week high of $186.72 from July 2023. 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 $735.28.
