What happened
Shares of document database-software company MongoDB (MDB -2.41%) took a steep 33% tumble in May, according to data from S&P Global Market Intelligence. It was a rough month for tech stocks overall, especially for those like MongoDB that offer sizzling revenue growth but haven't yet turned a profit. With the Federal Reserve raising interest rates and beginning to tighten monetary policy to try and tame inflation, it isn't a great market environment for investing in companies such as this.
However, to kick off the month of June, MongoDB reported stellar earnings for the first quarter of its current fiscal year. Shares promptly rallied nearly 20%. After paring some losses, the stock is now down 45% so far in 2022 -- although long-term shareholders are likely still happy with the nearly 800% return since the company's IPO in late 2017.
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So what
As to specifics for the last quarter, MongoDB beat all expectations. Revenue was up 57% year over year to $285 million. Even better was the surprise profit in Q1, at least on an adjusted basis.
The company reported adjusted earnings per share of $0.20 (compared to a loss of $0.06 the year prior), and free cash flow was positive $8.4 million. Granted, that's a paper-thin profit margin, and unadjusted net losses tallied up to $77.3 million (thanks in large part to $83.6 million paid out in stock-based compensation to employees), but it was progress.
Also of note was that MongoDB had $1.83 billion in cash and short-term investments on the books at the end of April 2022, offset by convertible debt of $1.14 billion. Though lack of profitability is likely to keep this stock highly volatile, this software business is built for rapid growth.
Now what
For the current fiscal year (which will end in January 2023), MongoDB now expects revenue to be at least $1.172 billion -- representing year-over-year growth of 34% or more. Adjusted losses are expected to return as the year progresses, though, with the expectation for adjusted loss per share to be within a range of negative $0.31 to negative $0.16.
MongoDB is still seeing rapid adoption of its Atlas multi-cloud database-management tool among existing customers, and lots of new customers are still signing up, too. Keeping the pedal to the metal on the expansion front is likely to make for a volatile ride for shareholders. Plus, this is still a premium-priced stock at about 13 times enterprise value to expected current year sales.
If you're a long-term investor who's planning to hold for a few years or more, there was still plenty to like in MongoDB's last quarterly update. If you were bullish on the cloud software company's prospects a few months ago, the investment thesis hasn't really changed.
Only the share price has changed, and it's now a whole lot cheaper after getting beat up so far in 2022. Just be ready to stay strapped in for some heightened turbulence if you choose to stick with this technologist.
