Overreaction to monday.com's earnings has created an attractive buying opportunity

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With the market at all-time highs, finding bargain stocks is becoming increasingly challenging. It seems like most high-quality growth names are reasonably valued or overvalued, as undervalued names are becoming a rarity. So, in the current red-hot environment, good buying opportunities are created during short-term market overreactions to earnings results or other news. monday.com’s ($MNDY) sell-off earlier this week is a good example of a market overreaction that created a good entry point.

monday reported earnings results on Monday before market hours that beat analyst estimates across the board. The company also issued upbeat guidance that topped Wall Street forecasts, but as you can see below, the stock tumbled post-earnings, falling by as much as 10%.

Wall Street was probably not impressed by the company’s cash flow margin guidance for 2024. monday expects its 2024 cash flow margin to be lower compared to 2023, due to increased investments in R&D and growth. However, as a high-growth company, monday’s decision to prioritize growth over profits makes perfect sense and can significantly benefit the business in the mid and long run. This dip, combined with the solid earnings results, makes MNDY a good buy. Let’s take a deeper dive.

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