Shares of MongoDB (MDB -2.40%) took a dive last month after investors reacted poorly to its second-quarter earnings report in the beginning of the month, and continued to slide as the broad market sold off in the second half of September. The Federal Reserve's interest rate hike and commentary from Fed Chair Jerome Powell added more pressure on stocks, hitting growth stocks especially hard.
According to data from S&P Global Market Intelligence, the stock finished September down 39%. As you can see from the chart below, most of the losses came early in the month.
MongoDB reported earnings for the second quarter of fiscal 2023, ended July 31, after hours on Aug. 31. Though the company actually beat estimates in the report, its guidance called for continuing losses, spooking the market at a time when investors are focused on profitability.
The stock plunged 25% on Sept. 1 even as revenue grew 53% to $303.7 million, easily beating estimates at $282.4 million. The company, which makes NoSQL database software, saw another round of strong growth from Atlas, its cloud-based database product, whose revenue jumped 73% and made up 64% of the company's revenue in the quarter.
Nonetheless, MongoDB continued to lose money on the bottom line as its adjusted loss per share expanded from $0.12 to $0.23, which compared to expectations of a per-share loss at $0.28. Bottom-line guidance was also worse than expected, indicating that profitability isn't scaling as fast as investors hoped. In an environment with rising rates, future profits become less valuable, which helps explain the sell-off.
Analysts lowered their price targets to account for the price drop, but many of them maintained bullish ratings on the stock, a sign they were pleased with the results.
Over the rest of the month, there was little news out on the stock, but shares drifted lower as the Fed's interest rate hike added to the pressure on growth stocks.
MongoDB stock fell to a 52-week low last month, and the stock is now down roughly two-thirds from its peak last November.
While the stock may not be cheap, it's much more reasonably priced than it was earlier, trading at a price-to-sales ratio of 12.4. Given the company's growth rate, its long-term prospects as the leader in NoSQL databases, and the success of Atlas, the current price looks like a good entry point.