MongoDB, Inc. (NASDAQ: MDB)
MongoDB offers its clients next-generation database systems. Long-time users of such systems will recognize the relational database, which organizes data neatly into rows and columns. But when it comes to handling data types such as audio clips, photos, and social media posts, that older model does not apply well. To address this, MongoDB developed a database that can neatly arrange and sort those data types, and developers have flocked to it for benefits such as its code-native data access and flexible document schemas. MongoDB has since seen a surge in hype after a strong report last week with an increase in mentions by 138% over the last day, prompting investors to wonder if this is the right time to take a position in the company. Currently, shares of MongoDB trade at $205.57.
There are multiple reasons why MongoDB should be on your radar at the moment, some of them are as follows.
Revenue grew an impressive 47% year over year to $333.6 million, handily beating analyst expectations of $303.4 million heading into the report.
Earnings were also solid, with adjusted earnings per share (EPS) of $0.23 vs. analyst expectations for a loss of $0.17 per share. Beating analyst estimates is the key reason that MongoDB's stock popped so much in the days following its earnings release.
On top of this revenue beat, MongoDB management raised its full-year fiscal 2023 guidance to $1.26 billion, compared to its previous estimate of $1.2 billion.
The company is seeing strong growth from its MongoDB Atlas cloud platform, which grew revenue by 61% year over year in Q3 and now makes up 63% of MongoDB's overall revenue.
Additionally, it claimed more than 39,000 customers as of Oct. 31, the end of its fiscal 2023 third quarter. That was a 26% year-over-year increase, showing that it's holding up well against competition from Amazon, Alphabet, and database pioneer Oracle.
Although MongoDB has generated a lot of positive hype, there are still reasons to be cautious before taking a position in the company. Here are two of them.
First, the company is not profitable, with a negative free cash flow of just under $50 million through the first nine months of this year. It has over $1 billion in cash on its balance sheet, so there are no liquidity concerns, but it will need to achieve profitability eventually.
Second, the valuation is nothing to scoff at. At a market cap of $13.3 billion, shares trade at a forward price-to-sales ratio (P/S) of 10.55 if the company can achieve its full-year revenue target. That is well above the market average.
With such rapid growth, it's no surprise to see investors optimistic about the stock at the moment. Now MongoDB has a fantastic opportunity to disrupt the multibillion-dollar database market through its cloud-based services. The company has executed strongly on this vision, putting up revenue growth of more than 30% since going public around five years ago -- and that could continue in the future. MongoDB is currently down 63% from all-time highs, making it the perfect chance for investors to enter the company now.
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