Veteran analyst sounds alarm after MongoDB stock soars 38 percent | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

MongoDB stock (MDB) soared 37.96% on Aug. 27, after the database platform developer posted its latest earnings that beat Wall Street analysts’ estimates.

For the fiscal second quarter, the company reported adjusted earnings of $1 per share on revenue of $591 million, beating Wall Street’s estimate of 66 cents per share on revenue of $556 million.

The revenue increased 24% year-over-year, with sales of Atlas, the company’s cloud database service, rising 29% from a year ago.

MongoDB provides several different database platforms for different-sized customers. However, the firm said it has been pursuing deals with larger clients while pulling back small- to mid-size customers.

CEO Dev Ittcheria said this strategy has been “really paying dividends.”

The company also said it added more than 5,000 customers year to date, which was “the highest ever in the first half of the year.”

For the current quarter, the company expects adjusted earnings per share between 76 and 79 cents and revenue of $587 million to $592 million, both exceeding analysts’ expectations.

Despite strong earnings and outlooks, MongoDB is trading at an elevated valuation, making the stock look more expensive than that of most software peers and raising concerns about how much upside is left.

Before its 37% post-earnings surge on Aug. 27, MongoDB shares were down nearly 8% for the year.

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Analysts revamp MongoDB stock after earnings

Several analysts have raised their price targets for MongoDB after earnings.

Citi analyst Tyler Radke raised the firm’s price target on MongoDB to $425 from $405 with a buy rating. The new target is the highest among Wall Street analysts.

Radke said in a research report that the earnings marked an “inflection” for the company.

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“Revenue saw the largest beat in years, Atlas growth meaningfully accelerated to the high-20s, and both top and bottom lines were raised well above the beat, a rarity in software these days,” the analyst wrote, adding that the stock is under-owned and trading at a discounted valuation.

“The results illustrate the idiosyncratic tailwinds at MDB, including AI usage that should only garner more scarcity value,” he wrote. “We think this was a thesis-changer quarter for MDB.”

Wall Street veteran sounds alarm on MongoDB’s problem

Stephen Guilfoyle, a 30-year Wall Street veteran who now runs Sarge986 LLC, a family trading operation, attributed Palantir’s recent decline to profit-taking by short-term traders. He said the earnings results were “very impressive.”

“Corporate execution is excellent. Cash flows are improving rapidly. The balance sheet is about as good as a balance sheet can get for a company this size,” Guilfoyle wrote in a note published on TheStreet Pro.

Guilfoyle noted that MongoDB’s technical picture looks stronger after breaking out this week. The stock cleared a key $251 level, filled an old gap from March, and opened a new one that could bring it back toward $221. Indicators like relative strength and the MACD also show momentum picking up.

“I do think MDB is worthy of investment. I also think that the stock will, at some point, if not fill the newly-created gap, at least test the pivot from above or maybe even the 200-day SMA at $229,” he said.

Still, Guilfoyle cautioned that he won’t chase MongoDB stock after surging because it is volatile and expensive.

“Is the stock expensive at 68-times forward looking earnings? The answer is ‘of course.’ We also know that this does not matter like it used to, especially when growth is involved and growth here is accelerating,” he wrote.

He also highlighted MongoDB’s high volatility over the past year, peaking at $370 and slipping as low as $141. The stock closed at $295.7 on Aug. 27.

Guilfoyle highlighted risk management. He said he would rather trim or even short a small number of shares at current levels than buy aggressively into the rally, while keeping an eye on the $250 area for reentry.

“This is one stock where patiently waiting for one’s price is often a strategy ultimately rewarded,” he added.