MongoDB is the IBD Stock of the Day for Friday, as MDB stock forms a consolidation pattern and nears adding a handle. The database software player is primed to benefit from the coming artificial intelligence boom that will require vast amounts of data, according to analysts.
MDB stock rose 0.9% to close at 392.57 on the stock market today.
MongoDB shares have gained 98% on the year entering trading Friday. The stock is also on the IBD 50 and IBD Tech Leaders lists.
MDB Stock: Sizing Up AI Potential
New York-based MongoDB's main platform, Atlas, is built on NoSQL. The document-based data platform gives developers flexibility and the ability to store vast amounts of data, the company says. It also works across multiple cloud platforms.
Wall Street considers MongoDB a potential AI winner, with the ability to capture more share in a massive database market.
"MongoDB is a best-of-breed next generation database vendor that is well-positioned in the rapidly growing NoSQL unstructured database market," BofA Securities analyst Brad Sills wrote in a client note last month.
Sills initiated coverage with a buy rating and a target price of 450 in an October client note.
As more companies adopt generative artificial intelligence products, Sills says the volume and sophistication of data applications will increase.
"This should serve as a tailwind for MongoDB, given the platform's flexible document model to handle complex data structures and evolving data models," Sills wrote.
On Thursday, Wells Fargo initiated coverage of MongoDB with a buy rating, according to Seeking Alpha, citing MDB's potential as an AI play.
Earnings On Deck
MongoDB will report earnings for its August through October quarter on Dec. 5. Analysts expect adjusted earnings to climb 121% year over year to 51 cents per share, according to FactSet. Sales are expected to increase 22% to $406 million.
Barclays analyst Raimo Lenschow said in a client note this week that MongoDB has "a nice setup" against conservative guidance for its fiscal third quarter. But he cautioned that shares are already up significantly this year and have gained about 13% following strong earnings from fellow software firm Datadog on Nov. 7.
That stock performance, "does not leave a lot of room for error," Lenschow wrote. "As a result, we are probably more cautious for this quarter."
For its quarter ending in July, MongoDB reported adjusted earnings of 93 cents a share, more than doubling Wall Street's prediction for 46 cents, according to FactSet. Sales jumped 40% to $423.8 million, vs. expectations of $394 million
"We are at the early stages of AI powering the next wave of application development," MongoDB President and Chief Executive Dev Ittycheria said in the Aug. 31 news release. "We believe MongoDB provides developers a unified platform that supports both the foundational requirements necessary for any application and the exceptionally demanding needs of AI-specific applications."
MDB Stock: Consolidation Pattern
MDB is in a consolidation pattern with a buy point of 439, according to MarketSmith. If MDB can hold back for a couple more days, it'll have a handle with a lower official buy point of 402.70. But if MongoDB goes before then, investors could still use that 402.70 as an early entry.
MongoDB stock has a best-possible IBD Composite Rating of 99, measuring fundamental and technical performance.
Further, MDB shares have a strong Relative Strength Rating of 98, according to IBD Stock Checkup. The score puts MDB stock in the top 2% of all stocks when it comes to 12-month performance.
