Monday.com’s 82% Collapse: Value Trap or Falling Knife?
The market has a way of correcting consensual hallucinations. It does not care about your narrative, your slide deck, or your proprietary “Agentic AI.” It cares about cash flow, it cares about margins, and eventually, it demands that the price of an asset bears some resemblance to its economic reality.
Monday.com [MNDY], a darling of the cloud-based collaborative work-management sector, has finally faced this reckoning. After reporting earnings that technically “beat” expectations but failed on the only metric that matters—future guidance—the stock plunged 22% in a single session. This move pushes the stock down 82% from its all-time high in November 2021 and 50% below its IPO price.
For the uninitiated, a drop of this magnitude is not a “dip.” It is a repricing of the business model. It is the market signaling that the growth-at-any-cost era is over, and the bill has come due. The question now facing investors is whether this represents a deep-value opportunity to bottom-fish, or if they are staring at a falling knife that has further to drop.
To answer this, we must strip away the marketing fluff and look at the mechanics of the collapse. We need to follow the value, or in this case, the lack thereof.
The Analyst Echo Chamber
There is a peculiar phenomenon in the financial services industry where the people paid to analyze stocks are often the last ones to notice a building is on fire. In early November, when Monday.com was trading north of $200 per share, the consensus was overwhelming.
According to data from Zacks, 80% of the 25 brokerage firms covering the stock rated it a “Strong Buy.” Another 8.3% said “Buy,” and 12.5% said “Hold.” Not a single analyst had the courage or the foresight to slap a “Sell” rating on a company trading at nosebleed multiples while the macroeconomic environment for SaaS (Software as a Service) was visibly deteriorating.
Armed with these “Strong Buy” ratings, retail and institutional investors alike watched the stock plunge 63% in just three months. This disconnect is not accidental; it is structural. Analysts are incentivized to maintain access to management and to sell the dream of perpetual growth. A “Sell” rating burns bridges. A “Buy” rating keeps the lines of communication open.
However, capital markets are ruthless. The absence of a “Sell” rating does not prevent a sell-off. It simply ensures that when the sell-off happens, it is violent, panicked, and leaves the “smart money” looking incompetent. If you are relying on consensus ratings to allocate capital, you are not investing; you are outsourcing your due diligence to a group that is structurally incapable of calling a top.
The Mechanics of the Guidance Miss
Let’s dissect the earnings report. Monday.com reported Q4 revenues of $334 million, representing 25% growth. They posted an adjusted profit of $1.04 per share. On paper, these are beats. In a bull market, the stock might have popped 10% on this news.
But we are not in a bull market for unprofitable or barely profitable tech. We are in a market that demands visibility.
The collapse was triggered by the guidance. The company forecasted Q1 revenue of $338-340 million, implying a growth rate of roughly 20%. This fell short of expectations. More importantly, the guidance for operating income and full-year metrics also missed the mark.
Here is the mechanism at play: SaaS valuations are derived almost entirely from the second derivative of growth—the rate of change of the growth rate. When a company is growing at 50%, the market assigns a massive multiple because it extrapolates that dominance far into the future. When growth decelerates from 25% to 20%, the multiple doesn’t just contract by 20%; it collapses. The market stops viewing the company as a “hyper-growth” unicorn and starts pricing it as a mature, competitive software vendor.
A 20% growth rate is respectable for a legacy tech firm. For a company priced for perfection, it is a death sentence for the share price. The compression of the P/E (Price to Earnings) ratio is non-linear. Investors who do not understand this convexity get crushed.
GAAP vs. The “Adjusted” Reality
One of the most pervasive tricks in the modern corporate playbook is the use of “Adjusted” metrics to mask the actual cost of doing business. Monday.com touted an adjusted profit, but a look at the Generally Accepted Accounting Principles (GAAP) numbers paints a different picture.
GAAP operating income dropped to $2.4 million in Q4, down from $9.6 million a year prior. The GAAP operating margin collapsed to 1%, down from 4%.
Let that sink in. This is a software company—a business model famous for high gross margins and scalability—generating a 1% operating margin on hundreds of millions in revenue. Where is the leverage? Where are the economies of scale?
The discrepancy between GAAP and Non-GAAP usually hides one thing: Stock-Based Compensation (SBC). SBC is a real expense. It dilutes shareholders. It is a transfer of wealth from investors to employees. When you exclude it to show a profit, you are lying to yourself about the unit economics of the business. A 1% GAAP margin indicates a company that is spending furiously to acquire revenue that is becoming increasingly expensive to get.
The Dilution Engine
Speaking of Stock-Based Compensation, we must look at the share count. In 2025, Monday.com’s share count increased by 3.1% year-over-year.
This is the hidden tax on long-term holders. Even if the stock price remained flat, your ownership stake in the company decreased by 3.1%. When the stock price collapses by 22%, that dilution adds insult to injury. The company continues to issue new shares to pay its workforce, thereby permanently reducing the earnings power per share of existing stock.
Managements love to talk about “shareholder value,” but actions speak louder. Continuous dilution is a signal that the company views its equity as a cheap currency to fund operations, rather than a precious asset to be protected. Until this dilution stops or is offset by significant buybacks (funded by free cash flow, not debt), the stock faces a structural headwind.
Valuation: The Trap of the P/E Ratio
Is the stock cheap now? It depends on your definition of cheap.
With GAAP earnings per share projected at $2.24 for 2025, the stock trades at a trailing 12-month P/E ratio of 34x, even after the crash.
A 34x multiple for a company growing at 20% is not “value.” Historically, the S&P 500 trades at 15-18x earnings. High-quality tech giants often trade at 25-30x. For Monday.com to command a premium over Microsoft or Google, it needs to demonstrate superior growth or a wider moat.
Currently, it has neither. It has decelerating growth (20%) and a moat that is under siege. The “work management” space is crowded. Asana, Smartsheet, Atlassian, and even Microsoft Planner are all vying for the same budget dollars. In a tightening economic environment, IT departments consolidate vendors. They cut the niche tools and stick to the bundled giants. Monday.com is fighting a war on two fronts: decelerating demand and fierce competition.
Furthermore, the P/E of 34x assumes that the $2.24 EPS is sustainable and will grow. If the operating margin continues to hover at 1% or dips negative due to increased marketing spend required to maintain that 20% growth, that “E” in the P/E ratio vanishes, and the multiple becomes undefined.
The AI Wildcard: Threat or Opportunity?
The company mentions “Agentic AI products” as a growth driver. In the current market, adding “AI” to a press release is the standard move to arrest a falling stock price.
However, one must be cynical here. Is AI a revenue generator for Monday.com, or is it a deflationary force? AI agents have the potential to automate project management tasks that Monday.com currently charges seats for. If an AI can organize workflows without a visual drag-and-drop interface, does the value of a “visual work OS” increase or decrease?
It is entirely possible that AI commoditizes the very interface layer that Monday.com dominates. If the software becomes smarter, fewer humans are needed to manage it. Fewer humans means fewer seats. Fewer seats means less revenue. The company is pivoting to AI not just for growth, but for survival. This is a high-risk transition, and the market is right to be skeptical until proven otherwise.
The Balance Sheet Cushion
The one bright spot in this analysis is the balance sheet. Monday.com sits on $1.62 billion in cash and marketable securities. With a market cap of roughly $4 billion, nearly 40% of the company’s value is cash.
This provides a floor—eventually. It means the company is not going bankrupt tomorrow. It has the liquidity to weather a storm, acquire smaller competitors, or pivot its strategy.
However, a strong balance sheet does not make a bad stock a good investment. It simply prevents a zero. Value traps often have great balance sheets. They sit on piles of cash while their core business slowly erodes, burning that cash year after year until the acquisition premium evaporates. The presence of cash buys time; it does not buy a business model.
The Verdict: Falling Knife
So, is it time to bottom-fish?
The term “imploded stock” is appropriate here. A drop of 82% wipes out the speculators, the tourists, and the momentum traders. What is left are the bag holders and the vultures circling for a carcass.
The short interest is around 10% of the float. This could trigger a short squeeze if the company drops a miraculous press release, but relying on a short squeeze is gambling, not strategy.
From a fundamental perspective, the risk-reward profile is still skewed to the downside.
- Valuation is still rich: 34x earnings for 20% growth is not a bargain.
- Momentum is negative: Revenue growth is decelerating.
- Margins are thin: 1% GAAP operating margin leaves no room for error.
- Dilution is active: Shareholders are being slowly bled out by SBC.
The market is currently in the process of repricing SaaS from a “growth at any cost” framework to a “profitable growth” framework. Monday.com is caught in the middle of this transition. It is growing, but slower. It is profitable, but barely (and only if you squint).
Until the company can demonstrate that it can stabilize revenue growth while significantly expanding GAAP margins—not just adjusted metrics—the stock remains a falling knife. There is no urgency to buy. The “cheap” stock of today can easily become the “expensive” stock of tomorrow if earnings estimates are revised downward again.
Smart capital waits. It waits for capitulation, it waits for the valuation to disconnect from the fundamentals in the other direction (becoming absurdly cheap), or it waits for a change in the structural economics of the business. We are not there yet. Let the knife hit the floor, stop quivering, and rust a little before you try to pick it up.