What happened
Shares of MongoDB (MDB -1.39%) were pulling back on Monday after a pair of analyst notes came out on the software stock, each warning of near-term headwinds.
The stock declined as a result. As of 10:49 a.m. ET, it was down 8.7%.
So what
Morgan Stanley lowered its rating on MongoDB from overweight to equal weight, with analyst Sanjit Singh saying the hesitant spending environment could weigh on the company's performance over the next few quarters.
Singh said he still likes the long-term growth story from the NoSQL database software company, but believes that 2024 estimates are too high. He lowered his price target from $368 to $215, though that still represents an upside of 34% from the closing price on Friday.
Alternatively, KeyBanc analyst Michael Turits initiated coverage on the stock with an overweight rating and a price target of $215, the same as Morgan Stanley's.
Turits' commentary was similar to Singh's as he thinks there's an attractive long-term opportunity in the stock, though he acknowledges that its usage-based business model could face some headwinds in a recessionary environment.
Now what
A number of cloud stocks have already reported lengthening sales cycles and other signs of a weakening business climate, so it wouldn't be surprising if MongoDB was experiencing similar headwinds, especially since much of its business is usage based.
The software stock is set to report third-quarter earnings in two weeks, on Dec. 6. Analysts are expecting revenue to increase 33.8% to $303.5 million and its adjusted loss per share to expand from $0.11 to $0.17.
Like other cloud stocks, MongoDB has fallen sharply from its peak last year, down nearly 75%. It now trades a price-to-sales ratio of 10, meaning it could still fall further. Still, the long-term outlook looks promising for this database leader as its cloud-based Atlas product continues to put up monster growth.
