Monday.com Ltd (NASDAQ: MDNY) opened nearly 20% down on Monday morning after posting a better-than-expected Q3 but offering disappointing guidance for its current financial quarter.
While bulls would argue the strong headline numbers warrant buying MDNY shares on the post-earning slump, a deeper dive into both the fundamentals and technicals suggest otherwise.
At the time of writing, Monday.com stock is trading more than 50% below its year-to-date high in February.
Here’s why you shouldn’t buy the dip in Monday.com stock
Investors are recommended caution in buying the post-earnings dip in MNDY stock as underneath the strong headlines numbers were irrefutable signs of weakness in the company’s financial release.
For example, a 26% year-on-year increase in its revenue – which better-than-expected – marked a deceleration from previous quarters.
More importantly, the management’s guidance for up to 23% growth in Q4 suggests things are not very likely to improve in the near-term.
In Q3, Monday.com’s margins also contracted 400 basis points to 29%, indicating weaker working capital efficiency – possibly due to slower collections or less favourable billing terms.
Adding to the firm’s financial woes were its sales and marketing costs that made up more than half of its revenue in the third quarter, reinforcing that the stock isn’t worth owning heading into 2026.
MNDY shares appear egregiously overvalued
Another major red flag on Monday.com shares is the stretched valuation. Sure, the Nasdaq-listed firm is adopting artificial intelligence (AI) as a core part of its product strategy.
But even by AI stocks’ standards, its forward price-to-earnings (P/E) multiple of more than 200 – according to Barchart – screams overvaluation.
Simply put, there are simply too many better-priced stocks out there for exposure to the continued expected growth in artificial intelligence than Monday.com.
In fact, insiders haven’t recorded even a single buy transaction involving MNDY over the past 12 months – confirming even they believe it has baked in years of upside already.
When those closest to the company’s operations aren’t willing to bet on future upside, why should you?
Technicals point to further downside in Monday.com
Finally, from a technical perspective, the outlook for MNDY shares is just as bleak.
At the time of writing, the Israeli company is trading well below all of its major moving averages (50-day, 100-day, 200-day), signalling continued bearish momentum across multiple timeframes.
This suggests institutional ownership of Monday.com could reduce in the weeks ahead, potentially accelerating its ongoing sell-off.
Note that seasonality doesn’t currently favour the cloud stock either.
Since 2021, it’s returned just 2.28% on average in November, followed by a 3.44% decline in December, and another 1.29% dip in January.
And while Tel Aviv-headquartered firm remains “buy-rated” among Wall Street analysts, they too could revise their estimates (downwardly) on it after the Q3 earnings release posted today.
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