Shares of MongoDB (MDB +4.87%) popped on Wednesday, climbing as much as 4.7%. As of 11:48 a.m. ET, the stock was up 1.7%.
The catalyst that drove the database-as-a-service provider higher was a price target increase and bullish commentary from a Wall Street analyst.
NASDAQ: MDB
Key Data Points
Some love from Wall Street
Citigroup analyst Tyler Radke boosted his price target on MongoDB stock to $550 while maintaining a buy rating on the shares. For those following along at home, that represents potential gains of 36% compared to Tuesday's closing price.
While the analyst remains confident regarding MongoDB's long-term trajectory, his view is "more tempered" heading into the company's fiscal 2024 fourth-quarter results, which are scheduled for after the market close on Thursday. He pointed to the disappointing results reported by cloud rivals Elastic and Snowflake, which "underwhelmed" in the face of robust expectations.
Radke notes that channel checks suggest consumption is "healthy" and believes that investors should take advantage of any "pullback" and buy MongoDB stock.
Focus on the long term
A quick look at the company's forecast and Wall Street's expectations suggests MongoDB doesn't really have a high bar to clear. Management's forecast is calling for revenue of roughly $431 million at the midpoint of its guidance, which would represent year-over-year growth of 19%. The company is also guiding for adjusted earnings per share (EPS) of $0.45, compared to $0.57 in the prior-year quarter.
Wall Street's expectations are slightly higher, with analysts' consensus estimates calling for revenue of $434.2 million and EPS of $0.47, each just above the high end of management's guidance. That's not surprising, given MongoDB's history of "beat and raise," or exceeding expectations and raising its guidance.
Given the potential for volatility, I think the most important nugget in the analyst's commentary is to focus on the long runway ahead and worry less about the short-term stock price fluctuations.
MongoDB has a long track record of consistent top-line growth, and while it isn't profitable on a generally accepted accounting principles (GAAP) basis, the company generates plenty of operating and free cash flow, which suggests profitability is merely a matter of time.
The stock isn't cheap in terms of traditional valuation metrics, but history suggests its premium is well deserved. I think the analyst is spot on to buy the stock and hold for the long term.
