MongoDB Is Well-Positioned For Growth as AI Use Increases

MongoDB stock price outlook

Database specialist MongoDB Inc. (NASDAQ: MDB) has been forming a double-bottom base with a buy point above $414. Within its industry, the stock’s price performance is about equal with Splunk Inc. (NASDAQ: SPLK), and is outpacing Oracle Corp. (NYSE: ORCL)

MongoDB specializes in developing database technologies that can handle various types of information and can easily be scaled to store more data.

It’s a fairly recent IPO, having gone public in 2017, meaning it’s still in the phase of its life where it’s young enough to post some big gains. Since its IPO, MongoDB stock has increased in price by more than 1,100%.

It’s currently showing better price strength than about 97% of stocks on the market. As a group, the database industry has been outperforming most others, and has been among the stronger industries all year. 

Bullish Chart Action

A look at the MongoDB chart will show you that the stock has been consolidating below a July 19 high of $493. It retreated to a low of $342.01, then an attempted rally stalled out at $414 on September 1.

That rally attempt fizzled as MongoDB stock rolled over along with the broader market. It’s following the same trajectory as computer and technology stocks in general, which peaked in early September, then retreated again. It’s not unusual for a stock to trade in sync with its industry and sector.  

On October 12, Bank of America initiated coverage with a rating of “buy,” and a price target of $450, which you can see using MarketBeat’s MongoDB analyst ratings

Analysts’ consensus view of the stock is “moderate buy” with a price target of $416.31, an upside of 14.26%. Since the company’s second-quarter earnings report on August 31, 16 analysts boosted their price targets on the stock. 

In their research note, Bank of America analysts called MongoDB a best-of-breed next-generation database vendor that is well-positioned in its particular market space, which boasts a 22% compound annual growth rate. 

Poised to Nab Share from Amazon, Microsoft

Analysts Brad Sills and Carly Liu added that MongoDB may nab share from market leaders Inc. (NASDAQ: AMZN) and Microsoft Corp. (NASDAQ: MSFT), which have products that compete in the same database arena as MongoDB. 

They also said MongoDB’s new products could sustain percentage growth rates in the high 30s. They cited interviews with nearly a dozen system integrator partners in recent months, whose feedback suggests a healthy pipeline for the new products to support the deployment of new AI applications. 

In June, the company announced a partnership with Alphabet Inc.’s (NASDAQ: GOOGL) Google Cloud to help developers build AI-powered applications. 

Since the tech and broad market pullback in early September, Wall Street has become more skeptical of AI as simply a promising technology. Instead, investors and analysts want to see proof that AI applications can actually deliver sales and earnings growth.

Becoming a Big AI Player

The Bank of America analysts seem to believe MongoDB is a company that will see real increases from the AI rollout. In general database developers, along with chipmakers, are well-situated to benefit from not only generative AI, such as ChatGPT, but also from database sorting tasks.

Those include scrubbing lists and identifying discrepancies, analyzing patterns, detecting breaches and enforcing security rules and protocols. 

“We believe that MongoDB is well-positioned to capture share of the $108 billion database market,” said Bank of America analysts. 

In particular, they cited the strength of MongoDB’s large developer community, its proprietary document storage model, support of 13 programming languages, and its multi-channel marketing strategy. 

Triple-Digit Earnings Growth

Wall Street is eyeing earnings growth of 188% this year, fiscal 2024, to $2.34 a share. Next year that’s expected to rise by another 19% to $2.77 a share. 

The company pivoted to profitability in fiscal 2023. It’s not uncommon for a new tech company to post losses for several years as it puts revenue back into fast growth. In the case of MongoDB, that appears to be paying off.

MarketBeat’s MongoDB earnings data show double-digit year-over-year revenue growth increases in the past eight quarters and earnings increases in seven of the past eight quarters. That’s the kind of growth that many of the best growth stocks typically flash, leading up to big price moves. 

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