Database company MongoDB (MDB +2.70%) tumbled 3% through 12:30 p.m. ET Monday after Bernstein analyst Firoz Valliji cut his price target on the stock nearly 12%, to $357 a share.
In a write-up on the price target change, The Fly commented that MongoDB "faces a more difficult setup heading into Q4 results," and there's a further risk that 2025 guidance could disappoint when MongoDB reports earnings on March 5.
NASDAQ: MDB
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What Bernstein thinks about MongoDB
That's the bad news. The good news is that once earnings are out of the way, Bernstein's analyst thinks the stock might be a buy. Indeed, Valliji is maintaining his outperform rating on the stock. But why?
MongoDB's valuation has already "reset," says Valliji, falling from a high near $350 a share in early December to its present price closer to $265. Predicting next month's earnings report could "clarify" whether the stock is a buy, Valliji thinks investors should consider buying MongoDB -- not right now, necessarily, but after the latest numbers are available.
(A second reason to wait for earnings before buying is that MongoDB announced today it has acquired Voyage AI, "a pioneer in state-of-the-art embedding and reranking models that power next-generation AI applications." The earnings report may tell investors more about MongoDB's plans for the new subsidiary, and/or clarify how much it cost MongoDB to buy it -- a fact notably missing from the company's press release on the acquisition).
Is MongoDB stock a buy?
As things stand today, MongoDB is a $21.9 billion business, unprofitable but with $148 million in trailing free cash flow -- a number that's been rising over the past couple of years. It works out to a 148 times price-to-free-cash-flow ratio.
On its face, that looks pretty expensive, even with free cash flow over the last nine months rising 50% year over year. Seeing as most analysts currently forecast dramatically slower growth (18% or less) over the next five years, though, I'm inclined to agree with Bernstein on not buying until after earnings... and unless MongoDB's numbers are out of this world, maybe not even then.
