MongoDB is the IBD Stock of the Day for Monday, as MDB stock has rebounded from its 50-day moving average and formed a consolidation pattern. The database software company is looking to build off a big 2023 in which its stock value more than doubled.
New York-based MongoDB provides more than 46,000 corporate customers with database software. MDB stock gained 108% in 2023, helped by triple-digit earnings growth and a view among investors that the company is primed to benefit as enterprises adopt artificial intelligence.
But shares of MongoDB slumped for a period after a breakout late in November. Shares sank after its December earnings report. The company's results bested analysts' sales and earnings estimates, but apparently failed to wow investors who had high expectations.
On the stock market today, MDB stock is up 3.4% in recent action at 414.73. The stock is on the IBD 50 and Tech Leaders lists and on IBD SwingTrader.
MDB Stock: AI Debate In 2024
A central debate for MDB stock in 2024 is how much it can benefit from AI.
MongoDB's main platform, Atlas, is a leading provider of NoSQL, or non-relational, database software. It is designed to offer vast amounts of data storage in the cloud. Analysts expect that companies adopting data-hungry generative AI products will drive greater demand for database products.
That view helped drive MDB stock higher last year. But at least one analyst is concerned that investors are getting ahead of themselves. UBS downgraded MongoDB from buy rating to neutral on Jan. 4. Analyst Karl Keirstead cited UBS polling that found most companies are still just investigating how to use generative AI, rather than launching products.
"While we're enthusiastic about an AI-driven database growth catalyst, we're not picking up material evidence that this is playing out yet — it may prove to be a 2025 catalyst, (second-half) 2024 at the earliest," Keirstead wrote about MDB stock in a client note.
Meanwhile, MongoDB has launched new products focused on AI. MongoDB Chief Executive Dev Ittycheria told analysts on the company's earnings call in December that a new vector search product for AI has seen "exceptional interest." He cited the example of software company UKG using vector search to create an AI-powered assistant.
"We believe that the fear of missing out on the AI wave is a real driver for enterprises, and success with large deployments could trigger a domino effect of copycat use cases that accelerate product adoption," Truist Securities analyst Miller Jump wrote in a client note following MongoDB's earnings report in December.
Earnings Growth
MongoDB posted its most recent quarterly results on Dec. 4. For its fiscal 2024 third quarter ending in October, MongoDB reported adjusted earnings of 96 cents per share on $433 million in sales. On average, analysts polled by FactSet expected MongoDB to earn 51 cents per share on $406 million in sales. Adjusted earnings increased 317% year over year while sales increased 30%.
Despite the better-than-expected performance, MDB stock slid 10% following the report. Analysts pinned the blame on heightened expectations after MongoDB shares surged more than 100% leading up to the report.
Still, the results added to a run of strong earnings growth for MongoDB. The company's adjusted earnings per share increased 504% year over year for its July-ending quarter and 180% for its April-ending quarter.
The next report from MDB is expected in March, when the company will report results for its January-ending fiscal fourth quarter. Analysts polled by FactSet project MongoDB's sales will increase 20% but adjusted earnings will decrease 19%.
MDB Stock: Consolidation Pattern
Meanwhile, MongoDB stock has forged a consolidation pattern with a 442.84 buy point, according to IBD MarketSmith. That buy point represents a high point MBD stock reached on Nov. 30.
With its gains on Monday, MDB stock broke a downward trendline and bounced up from its 50-day moving average. For more aggressive investors, that could represent an early entry point.
MongoDB stock has a 98 IBD Composite Rating of a best-possible 99, measuring fundamental and technical performance.
Further, MDB shares have a strong Relative Strength Rating of 94, according to IBD Stock Checkup. The score puts MDB stock in the top 6% of all stocks when it comes to 12-month performance.
Also, MarketSmith shows that seven of the growth mutual funds most closely tracked by IBD are investors in MongoDB. Overall, MongoDB shares have an Accumulation/Distribution Rating of B-. That rating analyzes price and volume changes in institutional ownership for a stock over the past 13 weeks. The current rating indicates more buying than selling by institutions.
