Please ensure Javascript is enabled for purposes of website accessibility

MongoDB Stock Falls Despite Analyst Upgrade

By Evan Niu, CFA - Mar 12, 2021 at 3:23PM

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

The cloud database specialist received an upgrade from Wall Street, but broader tech weakness is dragging the stock down.

What happened

Shares of MongoDB (MDB -8.38%) 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."

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
MongoDB
MDB
$223.61 (-8.38%) $-20.44

*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 service.

Stock Advisor Returns
334%
 
S&P 500 Returns
117%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/25/2022.

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.