Monday.com (MNDY 2.81%) stock is sinking today despite the company reporting better-than-expected fourth-quarter results. The low-code and workflow software specialist's share price was down 8.9% as of 11:30 a.m. ET, according to data from S&P Global Market Intelligence. The stock had been down as much as 16.5% earlier in the day's trading.
Monday.com published its fourth-quarter results before the market opened this morning, reporting sales and earnings performance for the period that were actually far better than Wall Street's targets. The business posted non-GAAP (adjusted) earnings per share of $0.65 on revenue of $202.6 million, beating the average analyst estimate's call for per-share earnings of $0.32 on sales of roughly $197.8 million.
But despite the big sales and earnings beats, investors appear to be fixating on the company's less exciting forward guidance.
There's a lot to like about Monday.com's Q4 results
Monday's revenue was up approximately 35% year over year in Q4, and it blew past earnings expectations in the quarter. The company closed out the quarter with 2,295 customers generating annual recurring revenue of at least $50,000 -- up 56% compared to the end of last year's quarter.
Overall, the fourth quarter was a very strong one for the company, but Wall Street isn't happy with the near-term performance horizon. The company's sales guidance for the current fiscal year actually beat the average analyst target, which is surprising in the context of today's sell-offs for the stock. But there's a catch.
What comes next for Monday.com?
For the first quarter, the company is guiding for sales to come in between $207 million and $211 million. This guidance was essentially in line with the average analyst estimate's call for sales of $209 million in the period. Meanwhile, free cash flow is projected to be between $56 million and $60 million -- good for a 28% margin at the midpoint of the guidance range.
For the full year, management is targeting sales between $926 million and $932 million -- beating Wall Street's call for sales of $927.53 million. Free cash flow is projected to be between $200 million and $206 million -- representing a margin of 22%. Adjusted operating income is expected to be between $58 million and $64 million.
Monday's full-year guidance suggests that the business's free-cash-flow margin and profit margins will decline past the first quarter. The company appears to be ramping up spending at a time when the market would prefer that it prioritize profitability. Prioritizing growth over near-term earnings performance could pay off down the line, but Wall Street isn't happy with the move right now.
