Sleeper AI-Play MongoDB Could Triple In Size

MongoDB stock price

MongoDB (NASDAQ: MDB) was on virtually no one's radar as an AI play, yet it is. The company’s cloud-based database services and developer data tools make it perfectly positioned to benefit from the AI boom. That is seen clearly in the Q1 results and guidance, which was raised well above the analysts' consensus. The takeaway for investors is that profitability has improved, and the outlook robust. The analysts add to the story; they are raising their targets for the stock and leading the market higher is tracking 24 analysts with current ratings, which is a significant figure. Analysts include all the major financial institutions, which means the stock is widely held and closely followed regardless of its sleeper-like qualities. At least 13 of them updated their outlook following the Q1 release and guidance update, and all increased their price targets. All but 1 is above the consensus; the consensus is below the market action but trending higher quickly. The range of new targets is $370 to $430, which is the new high price target. This range assumes the stock is fairly valued and can move higher. 

The takeaway from the chatter is that core business growth is outpacing estimates without the aid of AI, and the AI angle improves the outlook. Goldman Sachs believes the company could scale to $6 to $8 billion in annual revenue, which is 250% growth at the low end of the range. 

MongoDB Has Blow-Out Quarter, Shares Rise 20% 

MongoDB had a blowout quarter in more ways than 1. To begin, the company’s revenue of $368.28 million is up 29% compared to last year. The gain is driven by a 40% increase in the managed database or core sales driven by a 2-year high net new additions. The revenue beat the consensus figures by 600 basis points, and there was also unexpected margin expansion. 

MongoDB widened its gross margin by 100 basis points on a GAAP and adjusted basis. This helped lever operational efficiency and drive a reduction in GAAP losses and a 3X improvement in adjusted income. More importantly, cash flow and FCF are up significantly compared to last year and are expected to remain strong in F2024. 

"We believe the recent breakthroughs in AI represent the next frontier of software development. The move to embed AI in applications requires a broad and sophisticated set of capabilities while enabling developers to move even faster to create a competitive advantage," CEO Dev Ittycheria said.

Guidance is a factor in the stock surge. The company guided revenue and earnings for Q2 and the year above the consensus figures. Execs expect adjusted EPS to top $0.43 in Q2 and $1.42 for the year, compared to $0.14 and $1.04, and the high end implies more robust growth. These figures could be light if the company gains traction during the year. One cause could be the Gitlab (NASDAQ: GTLB) Copilot, which can link to MongoDB and allows developers to write code with the aid of AI.

The Technical Outlook: MongoDB Is Reversing 

MongoDB is up strongly after the guidance update and will likely complete a reversal. The reversal faces resistance at the current levels, near $390, and may pause before completion. A move above $390 would be bullish and put higher targets into play. In that scenario, the next target for resistance would be near $440 and the analyst’s high price target. If not, MongoDB could be rangebound at current levels until later in the year. 


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