In this episode of MarketFoolery, host Chris Hill is joined by The Motley Fool's Alicia Alfiere to discuss how MongoDB's (MDB -2.40%) guidance offset strong fourth-quarter results for the cloud database business. Also, second-quarter sales for Campbell Soup (CPB 0.54%) were lower than expected, stalling the company's turnaround plans. They analyze those stories as well as how the streaming-video landscape looks for Netflix (NFLX 2.72%) now that Disney+ (DIS 0.33%) has 100 million subscribers.

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This video was recorded on March 10, 2021.

Chris Hill: It's Wednesday, March 10th. Welcome to MarketFoolery. I'm Chris Hill. With me today, Alicia Alfiere in the house. Thanks for being here.

Alicia Alfiere: Thanks for having me, Chris. I'm so happy to be here.

Hill: We've got the business of entertainment, we've got consumer staples, but we're going to start today in the cloud. MongoDB, the cloud database company, wrapped up its fiscal year. Fourth quarter revenue was higher than expected, the loss was smaller than expected. So, both of those are great, but guidance for the new fiscal year was a little lower than Wall Street was hoping for. So, shares of MongoDB are also a little lower this morning.

Alfiere: Yeah, that's right. Let's start by talking about what MongoDB does. I would say that right now our world is filled with data and software applications. So, a database is at the heart of all of that data and the software applications, especially when we get into more complex data. Facebook, for example, they have data from text that you might upload onto the site, photos, videos. These items can't be stored in the structured database of the past with rows and columns. Instead, we need a non-structured solution, and that's where companies like MongoDB come into play. Let's talk about their results starting with revenues. As you mentioned, the revenue for the fourth quarter was pretty good. The revenue grew 38% year-over-year, which beat the company's high-end guidance for that time. Their subscriptions grew 39% and a lot of that is based on the growth from Atlas, which is the cloud version of their database product.

Atlas revenues increased 66% year-over-year, and they now account for about 49% of the company's overall revenues. As you've mentioned, there are losses. They ended the quarter and the year with losses. So, a net loss at about $76 million in the quarter, which was worse than the net loss last year of $62.5 million for that same quarter. But management isn't really focused on profitability right now. Management is instead focused on growth and getting new users in the door. Again, building up that user base, and they do that in a few different ways. They have their free-to-download version of their database, which is their community platform. They focus less on securing long term contracts, more on adding as many new clients as possible, and then moving them toward that Atlas cloud subscription.

A good question is, if they're focused on customers, so how many customers do they have, and have they grown? For the fourth quarter, they ended with 24,800 customers, which is up 46% year-over-year. So, that's really good growth. Again, this growth was driven by Atlas. So, they had their cloud-based customers growing 51% year-over-year, which is pretty impressive. They're going to continue to focus on expansion both in products and end customers, which we could see from the increase of 45% in sales and marketing expenses that they've been doing, as well as a 38% increase in R&D.

You touched on guidance earlier, right now they're targeting 28% to 30% increase in revenues for their fiscal first quarter, which is the three months ending in April, and for the full-year, they're targeting about 26% to 30% in revenues. As you said, the street was a little disappointed in that. It is a modest, but I think respectable forecast, partially due to the COVID impact. So, they haven't seen a real big impact from COVID in terms of getting additional customers, whether it's from their community, free software, or from Atlas. But what they have seen some impact in is the expansion of their products. I think that's why we see that less-than-exciting revenue forecast from them.

Hill: Well, and you look at the stock. We've seen over the last few days, when any number of cloud stocks, tech stocks, pretty much everything trading on the Nasdaq is down 5% or more in a single day, it's only down a couple of percentage points and it's still more than doubled from where it was a year ago. I don't want to say they're sandbagging, but do you get the sense that management is sort of looking at the guidance for the fiscal year and saying, yeah, we think this is achievable, there's no upside to us going out and going with some astronomical growth projection, because we want to be able to hit whatever targets we put out there.

Alfiere: Exactly. I think that a lot of times, when management does give forward-looking guidance, again, remember during COVID, some businesses didn't necessarily give any guidance. So, I think that when they do, it really benefits them to give these modest forecasts, then they could beat them and feel good when they do.

Hill: Second quarter sales for Campbell Soup were lower than expected. The stock also selling off, again, down just a couple of percent. Although unlike MongoDB, this stock has not doubled over the past year. This stock is actually down about 10% over the past year. What's going on here? This is a consumer staple business, and just from a brand perspective, a rock solid, really good one. If Campbell's running into production problems, what is going on here?

Alfiere: Well, it's complicated. 2020 was a weird year for them. They were in the middle of a turnaround story and then COVID came in and there was this huge amount of demand which they benefited from. They did post revenue gains for the quarter ending January, they were up about 5% year-over-year. Like you talked about, they have those powerful brands. A lot of this growth was driven by an increase in soups, a 10% growth year-over-year, as a lot of people are starting to cook with soups from home. They also have the key brands of their snack segment, also up about 8%. So those are the salty snacks that we're all eating during COVID, as well as cookies that I enjoy like Pepperidge Farm. Nearly 75% of their brands held a group market share, and these increases were driven by consumer demands. Like we talked about, more people are staying home to cook and snacking. But the company did see declines in their food service which is for businesses and schools, and those fell, again, due to COVID because people are staying home and we're not as open as we have been in the past.

There were some supply issues, so they talked about this on their earnings call a bit this morning. They were ready for the holiday season. Like I said, their quarter ended in January, so they had their product in place for that. But they did have some issues with restocking afterward, and that was partially due to COVID. In terms of their net earnings, like I talked about, prior to COVID, Campbell's was in the middle of their turnaround story. They were looking to bolster their core meal and beverage divisions and sell off non-core assets, like they had a Dutch snack company, and I believe also an Australian snack company. They were looking to reduce debt and drive growth. If we take away the impact of their discontinued operations, so we could get like an apples to apples comparison, their net earnings increased the quarter by 43%, which is pretty solid. But if we look at what it was with those discontinued earnings, so the actual earnings last year was an 80% decline, which is a little bit disappointing, obviously, [laughs] more than a little bit. But they're continuing those cost cutting measures to be able to continue with their turnaround story.

They have a goal of getting to $815 million in cost savings for their full fiscal year and that's going to be important for them moving forward to really set up, to move away from being a turnaround story, and more to a growth story. But as we move forward, we are going to have some issues with year-over-year comparisons. They had pretty seller growth last year because of COVID. Now, moving forward, it's going to be a little bit difficult year-over-year, but they're optimistic about the future. They do recognize that there might be some supply issues moving forward because of COVID issues, but they're really optimistic and hoping that consumers continue to buy their products even after the pandemic due to taste and convenience. They are looking to add more convenient sizes to their packages, more flavors, and healthier ingredients.

Hill: We were talking earlier about companies offering guidance to varying degrees, and it seems like at least a little bit of what's happening with the stock that is for Campbell's is Mark Clouse the CEO. There were questions on the call where he basically didn't feel comfortable offering guidance with respect to things like what are you seeing, can you give us some insight into certain parts of the country that are opening up more than others? By the way, I'm not knocking him for doing that. But I do think it points to something we've talked about on the show before, which is that over the next three to six months, there are going to be businesses that are not going to be offering as much guidance as Wall Street analysts want. Therefore, some of them are not going to get the benefit of the doubt. I think, for all the reasons that you mentioned with respect to Campbell's turnaround, unfortunately for them, they're just not one of those businesses right now. It does, however, set them up as a potential value play because the stock down 10% over the past year, it's not an expensive stock if you look at it on a valuation basis. There is a version where a year from now, two years from now, this is for people looking for that slow, steady, bedrock part of their portfolio. This could be a good addition.

Alfiere: Agreed. Especially if they're able to take advantage of those cost cutting measures. I'd also like to note that they do pay a dividend as well, so if you like dividend stocks, there is a potential here, I think.

Hill: Our email address is [email protected]. Got an email from Rebecca in Illinois who writes, "Disney+ just passed 100 million subscribers. Who should be more worried? Netflix, or every other streaming service not named Netflix?" I love the way this is setup. [laughs] I mean, we can pull a lot of different threads here, but just to Rebecca's basic question, what do you think? Who should be more worried?

Alfiere: Well, full disclosure here first, I do own stock in Disney. But I do think that out of all of the streaming services, I do think that Disney is the most likely to challenge Netflix. Can they? That's a whole different question. But I do think that they have a strong pipeline for content. When you think about all of the movies, characters, and stories that they can put to use even with new and interesting plot lines. We looked at The Mandalorian which came out recently as well as WandaVision and the upcoming Falcon and Winter Soldier. Those are all content that will definitely drive viewership. But I think that they are definitely in the war for the spot of No. 2. I think that they are winning. Disney has over 100 million subscribers. HBO Max, about 17 million activated users, which are people who've downloaded the app or paid for it. Peacock, which also has a free component to it, which is an interesting play there, 33 million subscribers. They're hoping to boost this by having WWE content, which starts this month. There's an interesting play there. I think Amazon Prime has, I want to say, about 56 million subscribers.

Disney is definitely strongly in the spot of No. 2. But Netflix has 200 million worldwide subscribers at the end of 2020, and that's massive. Netflix has this big lead in terms of subscribers, and in terms of being a content powerhouse. Disney has that strong pipeline, but I think it's dangerous to underestimate Netflix. They are releasing a movie a week this year, which is incredible, and that's not even taking into account all of the shows. They're building up their presence in terms of international offerings with titles like Money Heist, so I don't know. I think Disney's got a fighting chance, [laughs] but I don't know if they could overcome it. What do you think?

Hill: I think that what you touched on at the very end there, is the part that I think a lot of people don't think about in the United States, which is the potential for international growth. I think Peacock has gotten off to a pretty impressive start. We'll see what the numbers look like a month or two from now to the extent that Paramount+, we get some insight into those numbers. I think that in the short term, it's a little bit like the World Wide West, I wouldn't bet against anyone. Longer term though, international growth becomes more and more important. I think at the moment, Netflix and Disney are the two best that are set up for that. In terms of who should be more worried, right now, it seems like Disney is working its way into the Netflix category of, if you're going to subscribe to a streaming service, Netflix is the default one, because of just how much content they have. Then, as you said, Disney+ has established itself already as a very strong second place. Everybody else is fighting for third.

Alfiere: Agreed. It's a really competitive market. There are things that are happening that are really interesting that make this content work conversation so interesting. We saw Amazon Prime is also negotiating with the NFL to potentially have those Thursday night games streaming, which could be a major game changer for them. I'm not sure. But then on the other end of the spectrum, you also have operators like Quibi, who really --

Hill: Oh, boy. Poor Quibi.

Alfiere: Yeah. [laughs]

Hill: The short [...] life of Quibi.

Alfiere: [laughs] Yeah, I guess so. It is like the Wild, Wild West in the content, but it's exciting to watch.

Hill: That's right. Just like the actual Wild, Wild West, there's a body count. Unfortunately for Quibi, they were not quick, there with the dead. Alicia Alfiere, thanks so much for being here.

Alfiere: Thanks. So glad to be here.

Hill: As always, people on the program may have interest in the stocks they talk about and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. That's going to do it for this edition of MarketFoolery. The show is mixed by Dan Boyd. I'm Chris Hill. Thanks for listening, we'll see you tomorrow!