Shares of Monday.com (MNDY 0.54%) were down 23% today as of 11:45 a.m. ET. The high-flying software stock has been unwinding in recent months, but this latest drop sends it below where it made its debut in public trading following the IPO in June 2021.
The big single-day drop can be chalked up to the fourth-quarter 2021 earnings report. Revenue of $95.5 million represented a 91% increase from a year ago, capping off a fantastic first year for Monday.com as a public company. Full-year sales were $308 million, also a 91% increase.
Given the torrid pace of growth the company is posting, why the feelings of impending doom among investors? It all has to do with interest rates. The Federal Reserve has indicated it will begin hiking its short-term benchmark rate starting in March to fight inflation, which has been the news weighing on growth stocks in general in recent months.
Monday.com did generate an adjusted operating loss of $52.6 million and positive free cash flow of $2.6 million last year. So with $887 million in cash and equivalents on balance, Monday.com isn't in need of borrowing money right now to fund its rapid expansion. Nevertheless, interest rates are still weighing on stocks, since higher rates equate to a lower present value on stock valuations.
It's gotten ugly for the stock price as of late, but in times like these it's more important than ever to focus on a company's long-term potential -- especially if your original intent was to own for many years. Monday.com is clearly doing something right with its flexible platform for building work management software tools.
As for guidance, the company expects full-year 2022 revenue to increase at least 53% to $470 million to $475 million. Shares now trade for just 13 times 2022 expected sales to enterprise value after the stock has tumbled nearly 60% from its all-time highs.