What happened

Shares of Monday.com (MNDY 3.34%) are having a bad case of the Mondays this fine Wednesday. The stock fell as much as 21.2% in the morning, lingering at a slightly milder 18.5% loss as of 12:30 p.m. EST. The company posted robust third-quarter results early in the morning, but the analyst-stumping report wasn't enough to sustain Monday's surging share prices.

So what

Monday provides software-as-a-service (SaaS) tools that help companies both large and small build and manage their digital business needs, ranging from customer relations to building mobile apps.

Third-quarter revenue surged 95% above the year-ago reading, landing at $83 million. Adjusted net losses stopped at $0.26 per share, compared to a loss of $0.81 per share in the third quarter of 2020. Analysts had expected a loss of roughly $0.60 per share on top-line sales near $74.7 million.

Monday's management also provided revenue guidance far ahead of the current Street view for the fourth quarter. The company is experiencing strong customer loyalty while its footprint in the enterprise-scale market more than tripled from the year-ago reading.

Office worker watching a large red charting arrow crashing down through the floor at their feet.

Image source: Getty Images.

Now what

It's quite rare to see a sharply negative price change for companies that just reported results way above Wall Street's expectations, but this move needs some context. The company's equally impressive second-quarter report triggered a massive share price gain that worked out to 71% for the month of August, and investors were champing at the bit to catch the next massive surge. So the stock rose 26.8% on enormous trading volumes in the two days leading up to this report. Under these circumstances, it would have taken a record-breaking home run of a report to live up to the market's impossibly high expectations.

So the stock has retreated to prices last seen on Monday morning. Monday still trades at sky-high valuation ratios such as 70 times trailing sales and 21 times the company's book value. That's a much safer point of entry than the speculative price spike of the last couple of days.