Morgan Stanley’s Best Overweight & Quality Stocks: Top 25 Stocks

2. MongoDB, Inc. (NASDAQ:MDB)

Number of Hedge Fund Holders In Q2 2024: 54

Average Analyst EPS % Revision: 13.3%

MongoDB, Inc. (NASDAQ:MDB) is a software as a service (SaaS) company that operates in the cloud database market. This places the firm right in the center of an important sector in the SaaS industry as data will drive the AI era. MongoDB, Inc. (NASDAQ:MDB)’s shares are down 27% year to date, on the back of a massive 29% drop in the tail end of May. This was because of the two key drivers of SaaS valuation, namely cost control and revenue growth. While MongoDB, Inc. (NASDAQ:MDB)’s Q1 results saw its revenue of $450.6 million grow 22% and beat analyst estimates of $439.7 million, the shares fell as the company guided Q2 revenue at a $462 million midpoint and earnings at $0.47. These undershot analyst estimates of $470 million in revenue and $0.58 in EPS. MongoDB, Inc. (NASDAQ:MDB)’s full year revenue guidance also only projected a 12% annual growth, which was a marked slowdown over previous years’ growth of 57%. Consequently, investors weren’t impressed. However, the firm has key differentiators, particularly through its presence in the noSQL market and the Atlas platform which grew by 30% during Q2. MongoDB, Inc. (NASDAQ:MDB)’s Q2 results also beat revenue growth estimates of 9% through 13% growth. Looking ahead, a significant growth in annual revenues can prove to be a sizeable catalyst.

MongoDB, Inc. (NASDAQ:MDB)’s management commented on its growth during the Q2 2024 earnings call:

“Starting with consumption of existing applications on our platform, this is where we have historically seen a macro impact as usage of applications is impacted by the underlying business conditions of our customers. As we discussed on our last earnings call, in Q1, we did see broad-based consumption growth slowdown, suggesting some macro softening. Our usage trends suggest a similar macro-environment in Q2 as in Q1, even though Q2 Atlas consumption growth was modestly ahead of our expectations. Moving on to new business, we generally have not seen the macro-environment impact our ability to win new business, and that was true in Q2 as well.”