What happened
Shares of MongoDB (MDB 5.19%) tumbled 7.8% last month, according to data provided by S&P Global Market Intelligence, even though there wasn't any major news about the company itself. Earnings season has been tough for many tech stocks, with cloud computing services sparking particular concern on Wall Street.
Rumblings elsewhere in the market caused investors to sour on MongoDB and some of its peers.
Image source: Getty Images.
So what
Markets are volatile right now due to the Federal Reserve's interest rate hikes and general uncertainty about the global macroeconomy. Tech stocks led the charge over the past few years, but many of them have been crushed in 2022. Slowing growth is combining with falling valuations, and growth stocks are being hit the hardest by far. Unfortunately for shareholders, it doesn't take much to trigger big sell-offs in these situations.
MongoDB stock spent the first few weeks of October moving roughly in line with other cloud computing stocks and high-volatility tech companies. Its chart looked very similar to the WisdomTree Cloud Computing ETF and the ProShares UltraPro QQQ. That's fairly standard for a period with limited company-specific news.
MDB Total Return Level data by YCharts
Things got bad for MongoDB in the last week of the month when Amazon reported earnings. AWS, the company's cloud segment, reported a sharp slowdown to the slowest growth rate since 2014. Amazon's lukewarm outlook also worried the analyst community.
Amazon's performance shouldn't necessarily have a huge impact on MongoDB stock, especially since the troubling news was that AWS grew nearly 25% year over year. That said, the disappointing outlook poked a hole in hopes that certain tech industries would remain unstoppable in the face of global macroeconomic issues. Quarterly results from some companies showed that these are the early stages of a slow period. That's never going to be received well by growth investors, especially in a market that's already volatile.
Now what
MongoDB is likely to report quarterly earnings later this month. Until then, the stock will be at the mercy of broader capital market forces and any news on the cloud services industry as a whole. The stock has fallen nearly 75% over the past 12 months due to valuation ratios cratering. Its price-to-sales ratio sits just around 9 right now -- it was above 45 late last year. That's removed substantial downside risk for long-term investors, but it's still not cheap when compared to value stocks or some of the established tech giants.
MongoDB has excellent long-term growth prospects, and the valuation is finally rational enough to provide real potential. However, it's likely to remain more volatile than the market in general for the next few quarters.
