We came across a bullish thesis on MongoDB, Inc. (MDB) on Twitter by TechFundies. In this article, we will summarize the bulls’ thesis on MDB. MongoDB, Inc. (MDB)’s share was trading at $196.12 as of March 12th. MDB’s forward P/E was 75.76 according to Yahoo Finance.
A database administrator managing a large database, ensuring the client’s data is secure.
MongoDB (MDB) is experiencing a period of slower growth, with margin pressures and no immediate AI-driven tailwinds. However, the company has a track record of conservative guidance, which suggests potential upside as numbers likely trend higher. The risk/reward setup is compelling, with limited downside given its current valuation. While recurring revenue businesses that are both profitable and growing rarely trade below 5x revenue for long, the stock currently hovers near these trough multiples. Upside potential remains significant, with a 55% gain possible at 8x CY26 revenue and nearly 80% upside by CY27 under an optimistic scenario. Investors appear to be capitulating after setting overly ambitious expectations, contributing to the stock’s current undervaluation.
Despite a deceleration, MongoDB’s core Atlas platform remains a key driver, now accounting for 73% of total revenue. Subscription revenue of $531 million grew 19% year-over-year, surpassing expectations, though Atlas growth slowed to 23.7%. The decline is partly due to changes in billing practices, reducing revenue from unused credits. Customer metrics showed improvement, with net new Atlas customers rising to 2,000 from 1,400 a year ago. Large customers continued to expand, with those spending over $1 million annually growing to 61 from 46. Non-Atlas revenue, primarily on-premise solutions, also grew, albeit at a slower pace, as more customers transition to Atlas. Gross margins compressed due to Atlas’s lower margins and increased spending on customer onboarding, while stock-based compensation remains high but is trending lower.
Guidance remains a source of uncertainty, with management continuing its practice of under-promising. Full-year revenue guidance of $2.26 billion suggests 13% growth, falling short of Street expectations, while operating income guidance was also conservative. The bull case hinges on continued Atlas adoption, improving margins, and AI eventually driving demand. However, competitive pressures, particularly from hyperscalers and alternative database providers, create headwinds. While MongoDB remains a solid player in the database market, the challenge is sustaining strong growth in an evolving landscape. Despite concerns, the stock’s valuation and long-term potential create an attractive entry point for investors willing to navigate near-term uncertainty.
MongoDB, Inc. (MDB) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 70 hedge fund portfolios held MDB at the end of the fourth quarter which was 49 in the previous quarter. While we acknowledge the risk and potential of MDB as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MDB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.