MongoDB (NASDAQ:MDB) stock is plunging in Thursday’s pre-market trading even with a Q2 beat. A wider-than-expected Q3 loss guidance didn’t sit well with the investors, leading to a considerable decline in MDB stock price in the pre-market session on Thursday. Further, tough comparisons for the database software company’s subscription-based Atlas offering in the second half weighed on its stock price. MongoDB Atlas is a cloud-based database-as-a-service (DBaaS) offering that accounted for over half of the company’s FY22 revenue.
Notably, MongoDB stock is down over 17% in the pre-market session. Meanwhile, MDB stock has lost about 39% of its value this year.
MongoDB: Recent Past and the Near Future
MongoDB delivered total revenue of $303.7 million in Q2 FY23 (ended July 31, 2022), up 53% year-over-year. Further, it came ahead of analysts’ expectations of $282.4 million. Strong subscription sales led by a 73% jump in Atlas revenue and solid net additions of direct sales customers supported Q2 growth.
MDB reported an adjusted net loss of $0.23 a share that fared better than the Street’s projection of a loss of $0.28 a share.
Thanks to the momentum in its business and robust demand, management raised the full-year revenue outlook. The company now expects its FY23 revenue to be in the range of $1,196 million to $1,206 million, compared to its previous forecast of $1,172 million to $1,192 million.
While management’s upbeat top-line guidance is positive, tough year-over-year comparisons for Atlas revenue (which accounted for 64% of the company’s total Q2 revenue) in 2H acted as a dampener. It’s worth mentioning that MongoDB’s Atlas revenue growth has moderated from 82% in Q1 to 73% in Q2. With tough comparisons for 2H, Atlas’ revenue growth could decelerate further.
Equally disappointing was management’s guidance on the bottom line front. MDB expects to deliver an adjusted loss in the range of $0.16 to $0.19 per share, compared to the Street’s projection of a loss of $0.12 per share.
Further, for the full year, MDB expects to deliver an adjusted loss of $0.28 to $0.35 a share, compared to its earlier forecast of a loss of $0.16 to $0.31 per share.
Is MongoDB a Good Stock to Buy?
Despite a wider-than-expected loss projection, Wall Street is upbeat about MDB’s prospects. It has received 16 Buy, three Hold, and one Sell recommendations for a Strong Buy rating consensus. Meanwhile, analysts’ average price target of $397.93 implies 23.3% upside potential over the next 12 months.
While analysts are optimistic about MDB, hedge fund managers and insiders have been selling the stock. According to TipRanks’ Hedge Fund Trading Activity tool, hedge funds sold 33K MDB shares in the last three months. Meanwhile, insiders sold MDB stock worth $2.3M during the same period.
Per TipRanks’ data-driven stock score, shares of MDB have an Underperform Smart Score of 1 out of 10.
Bottom Line: Consumption Growth Could Slow, Long-Term Prospects Intact
MongoDB’s growth could show a bit of deceleration in the near term. The weak macro environment could weigh on Atlas’ revenue growth and consumption of its offerings in the short term. However, MongoDB’s ability to bring new business and generate incremental revenues from existing customers, a robust subscription revenue base, investment in growth initiatives, and its platform capabilities provide a solid underpinning for long-term growth.
