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MongoDB Stock Takes a Breather -- but Its Business Is Soaring

By Daniel Sparks – Jun 6, 2020 at 11:06AM

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Investors should think twice before they sell this growth stock to take their profits.

Shares of MongoDB (MDB 2.01%) fell sharply on Friday, declining about 10%. The pullback followed the cloud database management company's fiscal first-quarter report on Thursday afternoon. Despite both MongoDB's reported revenue and non-GAAP (adjusted) loss per share during the period crushing analysts' average forecasts, the Street responded by selling off shares.

Some investors may simply be taking a breather following huge gains so far in 2020. Year to date, the stock is up 53% -- and that's including Friday's pullback. This compares to the S&P 500's 1% decline over this same time frame.

MongoDB shareholders may want to think twice before they follow the Street's move to take profits on the stock. While shares are certainly pricier than they were earlier this year, this software-as-a-service stock's recent execution is impressive.

A diagram showing three laptops connected to the cloud

Image source: Getty Images.

Huge growth

In MongoDB's first quarter of fiscal 2021, revenue jumped 46% year over year to $130.3 million. Highlighting the company's momentum, this was an acceleration from 44% growth in the prior quarter. This top-line figure easily beat analysts' average forecast for revenue of $119.6 million.

Meanwhile, the tech company's adjusted per-share loss improved from $0.22 in the year-ago period to $0.13. This also beat analysts' consensus estimate of a $0.25 adjusted loss.

"MongoDB's strong first quarter performance in the midst of the COVID-19 pandemic demonstrates the value of our modern data platform for the success of our customers," said MongoDB CEO Dev Ittycheria in the company's fiscal first-quarter earnings release.

Atlas -- the company's fully managed cloud database offering -- continued to be a big growth driver. Total Atlas revenue was up 75% year over year and accounted for 42% of total fiscal Q1 revenue.

Expect more strong growth

While COVID-19 and related travel restrictions, store closures, and trends of consumers and workers sheltering at home are hurting many businesses, MongoDB is not likely to see a negative impact.

"[W]e are seeing clear signs that the current environment is reinforcing the long-term trends toward digital transformation and cloud migration," explained Ittycheria in the company's earnings release. "MongoDB is a clear beneficiary of these trends and we will continue making investments to fully capitalize on this market opportunity."

Management guided for full-year fiscal 2021 revenue to be between $520 million and $530 million, up from $421.7 million in fiscal 2020. Investors, however, should view this as a conservative forecast that the company will likely outperform. The forecast notably "reflects our current view of the negative impact from the COVID-19 pandemic and the macroeconomic environment," management explained in its fiscal first-quarter update.

Daniel Sparks 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.

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