MongoDB stock falls to key support after earnings: buy the dip?

MongoDB

MongoDB (MDB) is an American company that provides database solutions to companies from around the world. Some of its top customers are firms like Toyota. Cisco, Okta, and Novo Nordisk.

Its main product, known as Atlas, provides solutions like database, search, vector search, and stream processing. Companies using its solution can build applications faster and save money over time.

MongoDB offers its solution as a subscription, which ensures that it receives recurring revenue. Its annual revenue has grown from over $421 million in 2019 to over $1.68 billion last year, a trend that will continue in the coming years. 

MongoDB’s stock price dropped by over 16% on Tuesday after the company published weak financial results and forward guidance. It was trading at $290, down by 21% from its highest level this year. Its HypeIndex metric has moved to positive 282%.

Positive hype

• MongoDB reported relatively strong results as its revenue continued growing. Revenue rose by 22% to $529 million, helped by its subscription figures that rose by 22%.

• MongoDB also narrowed its losses to $27.9 million from $45.2 million in the previous year. The management believes that the company will turn a profit in the next financial year.

• The company has continued to innovate as it launched MongoDB 8.0, which has about 45 architectural enhancements and new features. It hopes that these upgrades will help companies reduce costs and increase scalability.

• MongoDB launched the MongoDB AI Applications Program (MAAP), which helps companies build AI applications. It has already launched partnerships with companies like Capgemini, Confluent, and IBM, which have joined the ecosystem.

• Analysts are optimistic that the MongoDB stock price will ultimately recover. The average stock target among analysts is $380, much higher than the current $290.

• Some of the most optimistic analysts are from Wells Fargo, Truist Securities, Keybanc, and Stifel. 

Negative hype

• MongoDB operates in a highly competitive industry, with its top competitors being companies like Oracle, MariaDB, Redis, and Couchbase. This competition explains why its revenue growth is decelerating.

• The company issued a relatively weak forward guidance that was lower than expected. Its revenue for the fourth quarter will be between $515 million and $519 million. Analysts were expecting the figure to be $519.46 million.

• MongoDB expects that its earnings-per-share will be between 62 cents and 65 cents, lower than the 66 cents that analysts were expecting. That is a sign that the management expects the business to underperform. 

• MongoDB, despite its strong growth, has failed to turn a profit. Its cumulative loss in the last five years stood at over $1.25 billion. 

• The company is overvalued when using the rule of 40 metric. Its revenue growth was 22%, while its profit margin was 12%, giving it a metric of about 10%, which is lower than the ideal 40.

MongoDB stock price analysis

The daily chart shows that the MongoDB share price made a strong bearish breakout after publishing weak financial results and guidance. It bottomed at $292, which is along the lower side of the ascending channel. This channel, which comes after it made a strong bearish breakout, can be said to be part of a bearish flag chart pattern. 

On the positive side, the stock bottomed at the 50-day and 100-day Exponential Moving Averages (EMA). It is also trading at the 61.8% Fibonacci Retracement level. 

Therefore, there is a likelihood that the stock will bounce back, and possibly retest the upper side of the channel at $375. A drop below the lower side of the channel will signal that bears have prevailed and push it lower in the near term.

If you’d like to receive more trending stocks straight to your inbox, check out our premium plans. Alternatively, if you’d like to hear more about the services offered by HypeIndex, you can check out our FAQ page.

HypeIndex is an AI platform that detects Hype in stocks and cryptos before it moves the market, providing reliable early detection for profitable investment opportunities.

The algorithm for our proprietary HypeIndex score is based on sentiment analysis, data science and machine learning.