Why monday.com's 35% Decline Presents a Strategic Entry Point for Long-Term SaaS Investors

The recent 35% plunge in monday.com's (NASDAQ:MNDY) stock price following its Q3 2025 earnings report has sparked debate among investors. While the market fixated on short-term guidance concerns, a deeper analysis reveals a compelling case for long-term SaaS investors to view this decline as a strategic entry point. The dislocation in valuation metrics, coupled with improving fundamentals and bullish analyst sentiment, suggests the stock is undervalued relative to its long-term growth potential.

Valuation Dislocation: A Mismatch Between Short-Term Concerns and Long-Term Potential

The immediate trigger for the selloff was monday.com's Q4 revenue guidance of $328–330 million, which fell short of the $333.5 million Wall Street expected. This prompted a sharp repricing of the stock, despite the company reporting a 26% year-over-year revenue increase to $316.9 million and a non-GAAP profit of $1.16 per share according to its official results. The market's overreaction created a valuation dislocation.

Key metrics highlight this disconnect. While monday.com's trailing P/E ratio stands at 113.02-well above the Software industry average of 31.5x according to MarketBeat-this figure represents a 60% decline from its four-quarter average, reflecting the recent selloff. Meanwhile, discounted cash flow models suggest the stock is undervalued by 21.9% to 29.1%, with intrinsic value estimates ranging from $185.16 to $211.44 per share. This discrepancy between traditional multiples and intrinsic value analysis underscores a mispricing driven by near-term fears rather than fundamental deterioration.

Improving Fundamentals: Sustained Growth and Margin Expansion

Despite the selloff, monday.com's underlying business remains robust. The company delivered 26% revenue growth in Q3 2025, outpacing many SaaS peers, while non-GAAP operating margins expanded to 15% according to its Q3 results. Free cash flow generation has also improved, with $47.5 million in non-GAAP operating income according to its earnings release. These metrics indicate a maturing business model that is balancing growth with profitability-a critical factor for long-term SaaS success.

Moreover, monday.com's customer base is strengthening. Enterprise clients and those with higher annual recurring revenue (ARR) are driving growth, suggesting the company is penetrating more lucrative segments. Analysts have noted the potential for AI monetization and new product adoption to further fuel expansion, reinforcing the case for sustained top-line momentum.

Analyst Sentiment: A Bullish Outlook Amid Caution

The analyst community has largely maintained a bullish stance, even as some adjusted price targets in response to the Q3 report. Tigress Financial Partners upgraded its price target to $310.00, maintaining a "Buy" rating, while BTIG initiated coverage with a $210.00 target and "Buy" recommendation according to Yahoo Finance. These upgrades highlight confidence in monday.com's long-term trajectory, despite near-term execution risks.

While Piper Sandler and Baird reduced their price targets due to concerns about longer sales cycles and macroeconomic uncertainty, the broader narrative remains positive. Analysts emphasize that monday.com's AI-native Work OS model and multi-pronged growth strategy position it as a "compelling long-term opportunity."

Strategic Implications for Long-Term Investors

For SaaS investors with a multi-year horizon, monday.com's current valuation offers an attractive risk-rebalance. The stock's P/S ratio of 8.89-a significant drop from its 2025 peak of 14.4 according to Investing.com-suggests the market is discounting future growth at a historically high rate. However, the company's ability to sustain 26% revenue growth, coupled with expanding margins, indicates this discount may be excessive.

The recent selloff also aligns with historical patterns in high-growth SaaS stocks, where short-term guidance misses often precede long-term outperformance. For instance, monday.com's forward P/E ratio of 28.17 implies the market is pricing in only modest growth for the next 12 months-a low bar given the company's track record.

Conclusion

monday.com's 35% decline is a textbook example of market overreaction. While the Q4 guidance shortfall justified a temporary repricing, the company's strong fundamentals, improving margins, and bullish analyst outlook suggest the selloff has created a strategic entry point. For long-term SaaS investors, the key takeaway is clear: monday.com's valuation dislocation reflects near-term concerns, not a fundamental shift in its growth trajectory. As the company executes on its AI and product roadmap, the current discount to intrinsic value could prove to be a rare opportunity in the high-growth SaaS sector.