What happened

Shares of MongoDB (MDB -3.89%) fell by as much as 6% on Friday despite getting an upgrade from Wall Street. Tech stocks have been weak today due to rising interest rates (again). As of 2:50 p.m. EST, the stock was still down 4%.

So what

Argus upgraded its rating on MongoDB from hold to buy while assigning a price target of $406, which represents 24% upside from yesterday's closing price. Analyst Joseph Bonner believes that the company can become a disruptive force in the massive market for enterprise database software. MongoDB continues to sacrifice near-term profitability to invest in future growth in order to capture market share, but Bonner believes this is the right strategy to utilize.

MondoDB logo

Image source: MongoDB.

Additionally, the recent sell-off throughout the tech sector is providing investors with an attractive entry point, according to the analyst. MongoDB shares have lost roughly 24% of their value from the all-time highs set last month.

Now what

Enterprises continue to migrate more of their critical IT workloads to the cloud, which represents an opportunity for MongoDB. The stock still trades at a lofty valuation, although its multiples have come down from peak levels in recent weeks.

"The market will likely judge MDB on such metrics as revenue growth, annual recurring revenue growth, and customer acquisition rather than on traditional profitability metrics, at least in the near term," Bonner wrote in a research note to investors. "As such, any pullback in these revenue measures would likely be a strong negative for MDB shares."