There are some weights that even Atlas has trouble carrying.
The titan from Greek mythology was condemned to hold up the heavens for all eternity after leading a rebellion against Zeus, the most powerful god and top dog of Mount Olympus.
Related: Analysts revamp their Zscaler stock price targets after earnings
In 2016, software company MongoDB (MDB) unveiled MongoDB Atlas, an on-demand cloud service, which CEO Dev Ittycheria said at the time "was yet another major milestone for the most feature rich and popular database for modern applications."
MongoDB shares cratered on Friday, falling nearly 24%, after reporting slower growth in the first quarter and offering disappointing guidance for the second quarter.
Ittycheria told analysts during the company's earnings call that "Atlas consumption growth was below our expectations in the first quarter."
"We saw less seasonal improvement than expected and this dynamic was true with customers across tenure, industry, size and geography," he said. "We believe this indicates a more challenging macro environment than expected at the beginning of the year."
While the macro environment had an impact, Ittycheria said that "we also believe this is partly due to the go-to-market changes we instituted last year."
"We have fine-tuned our process and incentive structures to make sure the field is focused on winning workloads with higher growth potential," he said. "Second, our new business performance in Q1 wasn't up to our standards. Operationally, we got off to a slow start in the quarter."
MongoDB
MongoDB CFO: 'Tailwinds getting stronger'
One analyst suggested that since artificial intelligence has become such a big issue for chief information officers and boardrooms it might be crowding out other spending, and Ittycheria said “we definitely think that's plausible.”
"We definitely see development teams experimenting on AI projects," Ittycheria said. "The technology's changing very, very quickly. But that being said, we don't see that as a reason for us to not hit our new business targets."
Related: Analysts revamp Salesforce stock price targets after earnings
For the record, MongoDB reported adjusted first-quarter earnings of 51 cents per share, compared with 56 cents per share a year ago.
Revenue totaled $450.6 million, up 22% from the year-ago tally. Analysts were calling for earnings of 40 cents per share on $439.7 million in sales.
Subscription revenue for the quarter was up 23% from a year ago to $436.9 million.
Looking ahead, the company called for adjusted fiscal second-quarter earnings of 46 cents to 49 cents per share, with $460 million to $464 million in revenue.
Analysts surveyed by LSEG were looking for 58 cents in adjusted earnings per share and $470.4 million in revenue.
Michael Gordon, chief financial officer, said the company expects Atlas growth to slow year-over-year, partially due to lower-than-expected consumption growth trends and lower starting second-quarter annual recurring revenue (ARR).
MongoDB also expects to see a sequential decline in non-Atlas revenues, he said, adding that "we do not believe that our fiscal '25 growth is an indication of our long-term potential."
"We have a small share in one of the largest and fastest-growing markets in all of software," Gordon said. "The secular tailwinds at our back are only getting stronger in the age of AI, and we're excited about the future."
TheStreet Pro's Bruce Kamich reminded readers that he warned investors back in March that "overall, the charts of MDB look vulnerable to further declines."
On Friday, Kamich referred to his earlier advice and said "continue to avoid the long side of MDB."
MongoDB 'latest casualty of worsening macro'
Analysts from several firms issued adjusted their stock price targets for MongoDB after the earnings announcement.
Bank of America Securities lowered the firm's price target on MongoDB to $300 from $470 and kept a buy rating on the shares.
More Tech Stocks:
- Walmart sounds alarm on major mistakes at self-checkout
- AI might help you get a new job instead of stealing the one you have
- Tesla's big China problem may be spreading to Europe
MongoDB is "the latest casualty of the worsening macro," with a broad-based slowdown in consumption across the customer cohorts having prompted lowered guidance, the firm said, noting that execution also contributed to the softer results.
The firm, however, believes both macro and execution headwinds are likely to be proven temporary and argues that the model is "now largely de-risked," noting that its new $300 target implied 30% upside to an after-hours share price of $230.
Piper Sandler lowered the firm's price target on MongoDB to $350 from $480 and maintained an overweight rating on the shares.
MongoDB joined a growing list of enterprise software vendors that have lowered full-year guidance on macro and artificial intelligence budgetary headwinds in just the last week, the analyst tells investors in a research note.
The firm reduced second half growth assumptions to 10% from 15%, saying weaker consumption trends could pressure the promising Atlas cloud database growth rate. However, the post-earnings share selloff creates a more favorable risk/reward, contends Piper.
Morgan Stanley analyst Sanjit Singh lowered the firm's price target on MongoDB to $320 from $455 and kept an overweight rating on the shares.
MongoDB delivered a softer 2% revenue beat along with a "surprising" cut to its Fiscal Year 2025 guidance as macro pressures and some sales execution weighed on growth in first quarter, the analyst said.
Singh said that he is confident in the company's ability to quickly resolve sales execution, but acknowledges that a rebound in growth will take time.
Related: Veteran fund manager picks favorite stocks for 2024
