A 26.3% jump in a day is no mean feat, and MongoDB (MDB) stock achieved that on Friday after releasing blowout fiscal second-quarter results.
The multi-purpose database platform provider posted a 44% year-over-year growth in revenues, driven by a growing user base across all its services, especially Atlas. (See MongoDB stock charts on TipRanks)
Investors didn’t seem to mind the 9% wider net loss per share, and 20 basis point contraction in gross margin that stemmed from high expenses. Further, higher free cash outflow compared to last year also did not bother investors, but it does keep me neutral on the stock in the near-term.
What caused the enthusiasm was a mix of impressive revenue growth, and solid revenue guidance for the fiscal third quarter as well as the full fiscal year of 2022.
The outstanding growth momentum of MongoDB’s database managing cloud service Atlas is the company’s strongest point. In the third quarter, Atlas revenues escalated 83% year-over-year, and represented 56% of total revenues.
Enterprises are increasingly rolling out mission-critical services on the cloud and acquiring new logos, which is driving the demand for Atlas. With the addition of 2,200 customers in the third quarter, Atlas recorded more than 29,000 customers as of July 31 this year.
MongoDB’s sales strategy of focusing on promising accounts that have the potential to generate more revenues is noteworthy. These focused accounts grew faster than other accounts despite being the smaller mix. Further, management aims to expand the scope of this program, and reach more targeted customer accounts in the coming months.
Needham analyst Jack Andrews pointed out the company’s history of fruitful sales strategies. “We note that the last sales adjustment MDB made, which focused on incentivizing account executives on new logos, has contributed favorably to Atlas growth trends.”
This buoys Andrews’ confidence in the company’s current sales program.
The analyst believes MongoDB to be “an emerging industry leader with strong products attacking a huge market opportunity.” Based on this sentiment, he reinforced a Buy rating on the stock, while increasing his price target to $534 from $415.
The analyst consensus for MongoDB also reflects optimism, with a Strong Buy rating, based on 12 Buys and four Holds. The average MongoDB price target of $472 indicates 6.9% downside potential from current levels.
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclosure: On the date of publication, Chandrima Sanyal had no position in any of the companies discussed in this article
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.
