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monday.com plunges 12.5% YTD: Should You Hold or Fold the stock?
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Key Takeaways
{\"0\":\"MNDY raised research and development spend to 20% of revenue in the second quarter of 2025.\",\"1\":\"MNDY trades at 46.29X forward P/E, above peers and industry, despite deteriorating fundamentals and outlook.\",\"2\":\"MNDY expects Non-GAAP operating margin to compress to 11-12% in the third quarter of 2025.\\r\\n\"}
monday.com (MNDY - Free Report) shares have lost 12.5% year-to-date(YTD), underperforming the Zacks Internet - Software industry and the Zacks Computer and Technology sector’s appreciation of 24.2% and 19.8% respectively. The drawdown raises questions about whether the company’s fundamentals justify patience or whether investors should reduce exposure amid intensifying competition and valuation risks. Let’s delve deeper to find out.
MNDY’s YTD Performance
Image Source: Zacks Investment Research
Rising Costs Risk Profitability and Margins
Monday.com delivered revenue of $299 million in the second quarter of 2025, reflecting 27% year-over-year growth. However, this pace marks a slowdown from the faster expansion rates the company enjoyed in earlier quarters, signaling that growth is already decelerating. Net dollar retention also weakened, standing at 111% in the second quarter, down from higher levels in the prior year. The Zacks Consensus Estimate pegs third-quarter NDR at 110.11%, showing no signs of recovery and highlighting that expansion within existing customers is moderating.
Meanwhile, costs continue to escalate with Research and development expenses reaching 20% of revenues, up from 16% a year earlier, driven by heavy investment in artificial intelligence initiatives such as Monday Magic, Monday Vibe and Monday Sidekick, along with ongoing expansion of the CRM and enterprise suite. While strategically important, these offerings are still at relatively early adoption stages and have yet to translate into meaningful revenue uplift or margin improvement. Sales and marketing spend also remained elevated at 47% of revenue, reflecting the higher cost of pursuing enterprise customers and the competitive intensity of the market.
Non-GAAP operating margin contracted to 15% in the second quarter from 16% a year ago and MNDY expects margins to compress further to just 11–12% in the third quarter. This combination of slowing growth, weaker retention and narrowing margins implies that incremental investments are not delivering operating leverage, raising doubts over whether profitability can scale in line with revenue growth.
The Zacks Consensus Estimate for third-quarter earnings is pegged at 89 cents per share, only a penny higher over the past 30 days and implying modest 4.71% year-over-year growth, suggesting that rising costs are not translating into meaningful earnings momentum.
The competitive backdrop in collaboration software remains intense and monday.com’s expansion is encountering strong resistance from entrenched platforms. Atlassian (TEAM - Free Report) continues to leverage its Jira and Confluence suite, now augmented with AI features, to reinforce its dominance in developer and project workflows, reducing the incentive for enterprises to adopt overlapping monday.com offerings. Asana (ASAN - Free Report) has also strengthened its workflow automation and AI insights, embedding itself more deeply into enterprise productivity stacks and competing head-on with monday.com’s core modules. Freshworks (FRSH - Free Report) , meanwhile, is broadening its CRM and service management platform with integrated AI at lower price points, creating a cost-effective alternative for small and mid-sized businesses. Collectively, Atlassian, Asana and Freshworks are embedding AI across mature, sticky ecosystems, leaving monday.com in the position of spending heavily to defend share rather than expanding profitably. This intensifying competition limits its ability to convert rising investment into durable revenue growth or margin improvement.
MNDY shares are overvalued
MNDY shares are overvalued, as suggested by the Value Score of F. The stock trades at a forward 12-month price-to-earnings (P/E) of 46.29X, higher than the Zacks Internet Software industry’s 40.16X. MNDY shares trade at a premium in comparison to its peers, Atlassian, Asana and Freshworks, which are trading at a forward 12-month P/E of 39.14X, 46.11X and 20.74X, respectively.
Against a backdrop of deteriorating fundamentals, weakening customer retention and a less established market position compared with peers, MNDY’s premium valuation appears increasingly difficult to defend.
MNDY’s Valuation
Image Source: Zacks Investment Research
Conclusion
monday.com continues to struggle with slowing growth, weakening net dollar retention, and narrowing margins, while elevated spending is not translating into stronger earnings momentum. Competitive pressures from more entrenched platforms are adding further strain, limiting the company’s ability to convert investment into sustainable returns. Despite these fundamental challenges, shares still command a premium multiple relative to peers and the industry, leaving valuations difficult to defend. With year-to-date performance already negative and downside risks outweighing upside, investors should avoid MNDY at current levels. These dynamics reinforce monday.com’s Zacks Rank #5 (Strong Sell) and justify a cautious stance. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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monday.com plunges 12.5% YTD: Should You Hold or Fold the stock?
Key Takeaways
monday.com (MNDY - Free Report) shares have lost 12.5% year-to-date(YTD), underperforming the Zacks Internet - Software industry and the Zacks Computer and Technology sector’s appreciation of 24.2% and 19.8% respectively. The drawdown raises questions about whether the company’s fundamentals justify patience or whether investors should reduce exposure amid intensifying competition and valuation risks. Let’s delve deeper to find out.
MNDY’s YTD Performance
Image Source: Zacks Investment Research
Rising Costs Risk Profitability and Margins
Monday.com delivered revenue of $299 million in the second quarter of 2025, reflecting 27% year-over-year growth. However, this pace marks a slowdown from the faster expansion rates the company enjoyed in earlier quarters, signaling that growth is already decelerating. Net dollar retention also weakened, standing at 111% in the second quarter, down from higher levels in the prior year. The Zacks Consensus Estimate pegs third-quarter NDR at 110.11%, showing no signs of recovery and highlighting that expansion within existing customers is moderating.
Meanwhile, costs continue to escalate with Research and development expenses reaching 20% of revenues, up from 16% a year earlier, driven by heavy investment in artificial intelligence initiatives such as Monday Magic, Monday Vibe and Monday Sidekick, along with ongoing expansion of the CRM and enterprise suite. While strategically important, these offerings are still at relatively early adoption stages and have yet to translate into meaningful revenue uplift or margin improvement. Sales and marketing spend also remained elevated at 47% of revenue, reflecting the higher cost of pursuing enterprise customers and the competitive intensity of the market.
Non-GAAP operating margin contracted to 15% in the second quarter from 16% a year ago and MNDY expects margins to compress further to just 11–12% in the third quarter. This combination of slowing growth, weaker retention and narrowing margins implies that incremental investments are not delivering operating leverage, raising doubts over whether profitability can scale in line with revenue growth.
The Zacks Consensus Estimate for third-quarter earnings is pegged at 89 cents per share, only a penny higher over the past 30 days and implying modest 4.71% year-over-year growth, suggesting that rising costs are not translating into meaningful earnings momentum.
monday.com Ltd. Price and Consensus
monday.com Ltd. price-consensus-chart | monday.com Ltd. Quote
Competitive Pressures Intensify for MNDY
The competitive backdrop in collaboration software remains intense and monday.com’s expansion is encountering strong resistance from entrenched platforms. Atlassian (TEAM - Free Report) continues to leverage its Jira and Confluence suite, now augmented with AI features, to reinforce its dominance in developer and project workflows, reducing the incentive for enterprises to adopt overlapping monday.com offerings. Asana (ASAN - Free Report) has also strengthened its workflow automation and AI insights, embedding itself more deeply into enterprise productivity stacks and competing head-on with monday.com’s core modules. Freshworks (FRSH - Free Report) , meanwhile, is broadening its CRM and service management platform with integrated AI at lower price points, creating a cost-effective alternative for small and mid-sized businesses. Collectively, Atlassian, Asana and Freshworks are embedding AI across mature, sticky ecosystems, leaving monday.com in the position of spending heavily to defend share rather than expanding profitably. This intensifying competition limits its ability to convert rising investment into durable revenue growth or margin improvement.
MNDY shares are overvalued
MNDY shares are overvalued, as suggested by the Value Score of F. The stock trades at a forward 12-month price-to-earnings (P/E) of 46.29X, higher than the Zacks Internet Software industry’s 40.16X. MNDY shares trade at a premium in comparison to its peers, Atlassian, Asana and Freshworks, which are trading at a forward 12-month P/E of 39.14X, 46.11X and 20.74X, respectively.
Against a backdrop of deteriorating fundamentals, weakening customer retention and a less established market position compared with peers, MNDY’s premium valuation appears increasingly difficult to defend.
MNDY’s Valuation
Image Source: Zacks Investment Research
Conclusion
monday.com continues to struggle with slowing growth, weakening net dollar retention, and narrowing margins, while elevated spending is not translating into stronger earnings momentum. Competitive pressures from more entrenched platforms are adding further strain, limiting the company’s ability to convert investment into sustainable returns. Despite these fundamental challenges, shares still command a premium multiple relative to peers and the industry, leaving valuations difficult to defend. With year-to-date performance already negative and downside risks outweighing upside, investors should avoid MNDY at current levels. These dynamics reinforce monday.com’s Zacks Rank #5 (Strong Sell) and justify a cautious stance.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.