Please ensure Javascript is enabled for purposes of website accessibility

Why MongoDB Shares Fell 21% Last Month

By Anders Bylund - Oct 9, 2019 at 7:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A perfectly fine earnings report failed to support the database vendor's skyrocketing valuation.

What happened

Shares of MongoDB (MDB 1.41%) fell 20.9% in September 2019, according to data from S&P Global Market Intelligence. The database software developer's slide started with a merely solid earnings report that failed to excite investors.

So what

MongoDB saw second-quarter sales rising 67% year over year, landing at $99.4 million. On the bottom line, net losses were reduced from $0.34 to $0.26 per diluted share. Your average Wall Street analyst would have settled for a net loss of $0.28 per share on revenues in the neighborhood of $91.7 million.

But the company's third-quarter earnings guidance was only in line with the analyst views at the time despite a slightly more optimistic revenue prognosis. For high-octane growth stocks like MongoDB, that's not always enough to preserve the stock's seat in Wall Street's nosebleed section. The stock plunged 17% over the next three days.

A yellow charting arrow crashing downward.

Image source: Getty Images.

Now what

Several analysts followed up on MongoDB's results with rosy reports on their own, often raising their price targets on the stock to at least $180 per share. Barclays analyst Raimo Lenschow expected these results to trigger a short squeeze and drive the stock much higher at the drop of a hat.

That didn't happen. At this point, MongoDB's stock has nearly doubled over the past 52 weeks despite a 16% decline in the past three months. You can call it a discount if you like, though it's always hard to call MongoDB a value stock when both earnings and free cash flows are negative.

That's life in the fast lane -- MongoDB's $7.4 billion market cap is built on investor expectations of continued hypergrowth for the foreseeable future.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends MongoDB. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

MongoDB Stock Quote
$361.86 (1.41%) $5.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/08/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.