Monday.com (MNDY -10.13%) stock is sinking today despite the company reporting better-than-expected fourth-quarter results. The low-code and workflow software specialist’s share price was down 8.9% as of 11:30 a.m. ET, according to data from S&P Global Market Intelligence. The stock had been down as much as 16.5% earlier in the day’s trading.
Monday.com published its fourth-quarter results before the market opened this morning, reporting sales and earnings performance for the period that were actually far better than Wall Street’s targets. The business posted non-GAAP (adjusted) earnings per share of $0.65 on revenue of $202.6 million, beating the average analyst estimate’s call for per-share earnings of $0.32 on sales of roughly $197.8 million.
But despite the big sales and earnings beats, investors appear to be fixating on the company’s less exciting forward guidance.
There’s a lot to like about Monday.com’s Q4 results
Monday’s revenue was up approximately 35% year over year in Q4, and it blew past earnings expectations in the quarter. The company closed out the quarter with 2,295 customers generating annual recurring revenue of at least $50,000 — up 56% compared to the end of last year’s quarter.
Overall, the fourth quarter was a very strong one for the company, but Wall Street isn’t happy with the near-term performance horizon. The company’s sales guidance for the current fiscal year actually beat the average analyst target, which is surprising in the context of today’s sell-offs for the stock. But there’s a catch.
What comes next for Monday.com?
For the first quarter, the company is guiding for sales to come in between $207 million and $211 million. This guidance was essentially in line with the average analyst estimate’s call for sales of $209 million in the period. Meanwhile, free cash flow is projected to be between $56 million and $60 million — good for a 28% margin at the midpoint of the guidance range.
For the full year, management is targeting sales between $926 million and $932 million — beating Wall Street’s call for sales of $927.53 million. Free cash flow is projected to be between $200 million and $206 million — representing a margin of 22%. Adjusted operating income is expected to be between $58 million and $64 million.
Monday’s full-year guidance suggests that the business’s free-cash-flow margin and profit margins will decline past the first quarter. The company appears to be ramping up spending at a time when the market would prefer that it prioritize profitability. Prioritizing growth over near-term earnings performance could pay off down the line, but Wall Street isn’t happy with the move right now.
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Monday.com. The Motley Fool has a disclosure policy.
