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MongoDB shares bounce back after testing the 200-day moving average following earnings

AInvestFriday, Mar 8, 2024 10:02 am ET
2min read

MongoDB (MDB), a leading database company, reported its fourth quarter earnings for fiscal year 2024, exceeding analyst expectations. However, a disappointing outlook led to a 10% decline in the stock. Shares tested the 200-sma ($387) in overnight trade and held that level, leading to a rebound in the name. MDB has erased nearly all its losses, setting up a key test for bulls at the breakeven point. 

The company reported earnings per share (EPS) of $0.86, excluding non-recurring items, which was $0.40 higher than the FactSet Consensus estimate of $0.46. Revenues also showed strong growth, increasing by 26.8% year-over-year to $458 million, surpassing the FactSet Consensus estimate of $437.19 million.

MongoDB has over 47,800 customers as of January 31, 2024, demonstrating the company's continued growth and success in the market. The strong customer base has contributed to the company's revenue growth and solid Atlas performance. 

MongoDB issued downside guidance for Q1, expecting EPS of $0.34-$0.39, well below analyst expectations of $0.62. The company also expects Q1 revenue of $436-$440 mln, compared Street expectations of $451.96 mln. 

Furthermore, MongoDB issued downside guidance for FY25, expecting EPS of $2.27-$2.49, compared to the consensus of $3.27. The company expects FY25 revenue of $1.90-$1.93 bln, compared to expectations of $2.04 bln. 

MongoDB's downside guidance is primarily attributed to the impact of multi-year term licenses and unused Atlas commitments, which will not repeat and will impact growth by ~5pts. This is a high gross margin revenue that is not repeating, and when combined with accelerated hiring, operating margins will take a step back from 16% in FY24. However, the implied level of Atlas deceleration in the guide is very conservative, and analysts see significant upside as likely. 

The company's Atlas revenue growth has been consistently strong, with a growth rate of 34% in Q4. 

MongoDB's downside guidance has led to a decline in share price, with analysts lowering their estimates and reducing their price targets. Mizuho has reiterated its Neutral rating and reduced its price target to $380, implying NTM EV/revenue of 17x. 

While MongoDB's financials for the fourth quarter were promising, its guidance for fiscal year 2025 fell short of expectations. The company faces headwinds in fiscal year 2025 due to the absence of $80 million in revenue from multi-year term licenses and unused Atlas commitments. This will impact growth by around 5 percentage points. Additionally, accelerated hiring and the absence of very high gross margin revenue achieved in fiscal year 2024 will lead to lower operating margins in fiscal year 2025.

Conclusion MongoDB has reported strong Q4 earnings, with revenue and operating margins ahead of consensus expectations. However, the company's downside guidance has caused concern among investors, leading to a decline in share price. Despite the downside guidance, MongoDB's strong customer base and consistent Atlas revenue growth suggest that the company is well-positioned for future success. Investors will be closely watching the company's performance in the coming quarters to assess the impact of the downside guidance and the overall market outlook.


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