Monday.com Hits Rock Bottom: Overdone Sell-Off Ready to Rebound

If you think AI is the death knell for software stocks, then monday.com (NASDAQ: MNDY) isn’t the stock for you. Its software-as-a-service business is ripe for disruption, setting it up for a slow implosion already priced into the market. However, if you think AI’s disruptive power is overstated, then the sell-off of monday.com is overblown, and an opportunity is arising. 

While AI is a disruptive force in the market, the company's Q4 results and guidance show that monday.com remains in high demand. Even in the unlikely event that AI disrupts and puts traditional SaaS out of business, it won't happen for years. The more likely scenario is that cloud-based SaaS companies like monday.com will continue advancing technology, build partnerships with leading models, improve ecosystem compatibility, and remain a driving force in business economics. The environment will shift and evolve, and leaders like monday.com are well-positioned to benefit. 

MNDY Stock Falls on Cautious Guidance, Spending Increases

Monday.com had a robust Q4 2025 with revenue growing by 24.6% to $333.9 million. The top line exceeded the analyst consensus forecast by 100 basis points, driven by strength in client wins and services penetration. The company’s net retention rate (NRR), a measure of revenue growth produced from existing clients, increased by 110%, underpinned by the strength of its larger clients. 

The company’s largest clients (defined as those with 10+ users) increased NRR by 114%, while businesses contributing more than $50,000 in annual recurring revenue increased their NRR by 116%. The number of clients with more than 10 users increased by 8%, while those contributing more than $50,000, $100,000, and $500,000 in ARR increased by 34%, 45%, and 74%, respectively, highlighting the business's utility to enterprises.

Margin news was also favorable. The company experienced significant margin contraction tied to FX headwinds and increased spending. However, the net result was that adjusted earnings outperformed by a wide margin, about 1300 basis points compared to analyst consensus, and spending increases more than offset the net increase.

Regarding spending, the impact of marketing and R&D was obvious, sustaining the company’s double-digit growth pace and driving formidable client wins. Increased spending is expected to continue in 2026, with a similar impact, but it isn’t expected to persist at such high levels indefinitely. 

Guidance was a sticking point for market participants following the release. The company issued a solid guide, forecasting 20% revenue growth in Q1 and about 19% for 2026. However, due to margin contraction, the guide was well below analyst forecasts.

There is a risk that monday.com’s slowing business could underperform guidance, but that doesn’t seem likely, given the internal metrics. Not only is client growth and penetration driving results, but indicators such as the 31% increase in current remaining performance obligation (RPO) and the 37% increase in RPO suggest that the guidance was cautious. 

Analysts Indicate a Deep Value Opportunity: Institutions Are Buying

Analysts played a role in monday.com’s stock price decline, but the movement looks overblown. Trading below $90, the stock is well below the low end of the target range, suggesting a deep-value opportunity. The valuation metrics, such as the price-to-earnings multiple, concur. Even assuming that Q4 and 2026 margin pressure persists, the growth trajectory puts this stock in the mid-to-high single-digits relative to its 2035 forecast. A stock price rebound of 100% to 300% could lie ahead, given a catalyst, and institutional activity is setting up the move. 

Institutions, which own more than 70% of this stock, have bought on balance aggressively for the past eight quarters. The trailing 12-month balance is more than $2 bought for each sold, accelerating to almost $3 to $1 in January 2026, suggesting the group will buy the February price dip and limit the downside potential. The market floor is likely near long-term lows and will be a critical support level for investors to watch. If this market falls below critical support and can’t regain traction, market dynamics will have shifted, making a deeper decline more likely. 

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The article "Monday.com Hits Rock Bottom: Overdone Sell-Off Ready to Rebound" first appeared on MarketBeat.