Shares of MongoDB fell Wednesday after the database software company reported a 30% jump in sales and earnings that one analyst said fell short of "highly elevated expectations." MDB stock slid 10% on the report posted Tuesday.
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.
MDB stock had more than doubled in value this year heading into the report, powered by sales growth and excitement over the company's potential as an artificial intelligence winner. Thus, the New York-based company had a high bar to clear. Further, enterprise technology peers such as Snowflake and Elastic posted better-than-expected results last week.
"MongoDB continued to perform at a high level in the third quarter, as evidenced by 30% revenue growth and better-than-expected profitability," Dev Ittycheria, president and chief executive of MongoDB, said in a news release. "We are pleased by our success in winning new workloads from both new and existing customers across verticals, geographies, and customer segments."
For the current quarter ending in January, MongoDB forecast sales of $431 million. Analysts were looking for 16% growth to $418 million, according to FactSet. The firm raised its full-year revenue forecast to $1.65 billion, compared to the $1.6 billion estimate it provided in the previous quarter.
On the stock market today, MongoDB stock fell 10.6% to close at 387.42.
MDB Stock: Up 120% This Year
MongoDB was up against high expectations coming into its report. Shares had gained 120% prior to the earnings release, including a 30% gain since October. At its late Tuesday price of 410, MDB stock was trading at an enterprise value about 17.6 times its estimated fiscal year 2024 sales, according to William Blair analyst Jason Ader. Similar high-growth enterprise software peers trade at a median valuation of roughly 10.5 times estimated annual sales, according to Ader.
The high valuation was driven in part by expectations that MongoDB can capture more of the massive market for corporate database spending. MongoDB's main platform, Atlas, is a leading provider of what's know as an NoSQL, or non-relational, database. The platform is designed to gives developers flexibility and the ability to store vast amounts of data, the company says. It also works across multiple cloud platforms.
"Despite continued pressure on consumption revenue from the tougher macro environment, we see a multiyear runway for growth as MongoDB establishes itself as the premier independent database for modern apps," William Blair's Ader said in note to clients Wednesday.
Software Consumption Trends
To that point, revenue from consumption of MongoDB's Atlas software jumped 36% on an annual basis and represented two-thirds of MongoDB's sales. That was ahead of analyst consensus of 30% growth.
Software companies that charge based on consumption of their products, rather than a monthly subscription, fell out of favor with investors earlier this year, as many companies have been cutting back on technology spending. But strong earnings reports from other consumption-based companies including Snowflake, Elastic and Datadog indicated the environment is shifting.
MongoDB's "Atlas results, although better than expectations, likely fell short of the buyside's elevated estimates post SNOW's and ESTC's solid consumption commentary last week," wrote Stifel analyst Brad Reback in a note to clients Wednesday.
MDB Stock: Technical Scores
Still, most analysts remain positive on MDB stock. Following the earnings report, 20 analysts raised their fiscal year sales projections for the company, according to FactSet.
Both William Blair and Stifel have buy or buy-equivalent ratings for MDB stock. Meanwhile, Goldman Sachs analysts pinned the stock market response to MDB on "highly elevated expectations." The investment bank reiterated a buy rating following the report.
"With a still underpenetrated TAM (total addressable market), increasingly complemented by Gen-AI tailwinds, we continue to view MongoDB as uniquely positioned to sustainably grow revenue +20% with healthy margin expansion," wrote Goldman Sachs analyst Kash Rangan.
Meanwhile, MDB stock on Wednesday fell below a recent 412.67 buypoint from a cup-with-handle pattern, according to MarketSmith.
Further, MongoDB stock has a best-possible IBD Composite Rating of 99, measuring fundamental and technical performance. And MDB shares have a strong Relative Strength Rating of 97, according to IBD Stock Checkup. The score puts MDB stock in the top 2% of all stocks when it comes to 12-month performance.
Further, MongoDB is on the IBD 50 list of best growth stock and the IBD Tech Leaders list.
