Will MongoDB Make Millionaires?

While data centers used to be the norm, cloud computing has firmly dislodged, enabling newer entrants like database provider MongoDB (NASDAQ: MDB) capture market share.

MongoDB’s platform helps its customers organize and access massive amounts of data. The software’s promise drove MDB up almost 1,750% at the stock’s $566 peak in 2021. After a tough 2022 where tech stocks struggled, MongoDB stock hasn’t come close to its earlier heights.

Now trading between $200-$300 per share, MDB share price is down over 37% year-to-date. The company has struggled in a tough economic environment where many businesses have cut back expenses to the bone. If the economy turns around, however, MongoDB’s cutting-edge platform, which is increasingly integrating artificial intelligence, may very well be in demand again.

So will MongoDB make its shareholders millionaires?

Why Did MongoDB Stock Drop?

After the company released its results for the 1st quarter of fiscal year 2025, shares dropped by over 26%. The earnings release was strong overall thanks to revenues of $450.6 million climbing by 22% year-over-year.

Just as it had done in the three previous quarters, MongoDB’s revenues beat analysts’ expectations, including a 2.42% Q1 beat.

But the company’s net loss of $80.6 million was nearly 49% worse than the same quarter the prior year. Diluted earnings per share worked out to -$1.10, which was still over 36% higher than analysts had forecast.

MongoDB’s Atlas database management software now accounts for 70% of the company’s revenue, while sales from the platform were up 32% in Q1.

The company reported 49,200 subscribers, but that wasn’t enough to beat expectations.

“We had a slower than expected start to the year for both Atlas consumption growth and new workload wins, which will have a downstream impact for the remainder of fiscal 2025,” said Dev Ittycheria, President and Chief Executive Officer of MongoDB. “As we look ahead, we continue to be incredibly excited by our large market opportunity, the potential to increase share, and become a standard within more of our customers.”

Sluggish platform adoption caused MongoDB to reduce its guidance for both the fiscal second quarter and FY25. The company forecasted Q2 revenue of $460 million compared to the expected $470.4 million. The forecasted earnings per share of $0.46 to $0.49 was lower than the $0.58 experts predicted.

For the fiscal year, MongoDB now expects between $1.88 billion and $1.90 billion in revenue, compared to earlier forecasts of $1.90 billion to $1.93 billion. The company initially announced earnings per share would be $2.27 to $2.49 for FY25, but it reduced that guidance to between $2.15 and $2.30.

The announcement clearly wasn’t what analysts had hoped for, which was a figure of $2.50 in adjusted earnings per share and $1.93 billion in revenue. It also disappointed investors, who largely sold MDB as a direct result of the dismal guidance.

Will MongoDB Stock Go Back Up?

The lower guidance was a disappointment, but one bright spot came in the form of market share, which was not ceded to rivals. Instead, the forecast was largely attributable to macroeconomic conditions and an inability to catch up with new business.

Management also said the FY25 guidance isn’t a representation of the company’s long-term potential. To reach that potential, MongoDB will need to expand its product line. In Q1, it announced MongoDB 8.0, a platform built to perform faster reads and updates, and substantially faster bulk inserts and time series queries.

The company also announced its MongoDB AI Applications Program (MAAP), which provides customers with reference architectures, pre-built partner integrations, and professional services to help them build AI-driven applications.

“We also see a tremendous opportunity to win more legacy workloads, as AI has now become a catalyst to modernize these applications,” Ittycheria said. “MongoDB’s document-based architecture is particularly well-suited for the variety and scale of data required by AI-powered applications. We are confident MongoDB will be a substantial beneficiary of this next wave of application development.”

The company also announced deals with Bendigo and Adelaide Bank to modernize those institutions’ banking technology using MongoDB software.

What Do Analysts Say About MongoDB Stock?

While it’s good news the company is continuing to innovate, it’s unclear how soon those changes will impact the company’s bottom line. Judging by the consensus among Wall Street analysts, that turnaround could happen sooner than later.

Analysts are broadly positive about the stock’s prospects with the bulk of them arriving at a consensus price target of $305 per share.

It’s noteworthy however that the range of estimates is large and spans from $215 per share to $400, suggesting there is a wide dispersion of views on where the share price may be headed.

Is MongoDB Stock Undervalued?

On a 5-year discounted cash flow forecast, MongoDB appears to be moderately undervalued with a fair value target of $265 per share.

However, a 10-year DCF paints a more optimistic forecast of $286 per share, suggesting long-term investors will be handsomely rewarded.

Will MongoDB Stock Make Good Money?

MongoDB stock is likely to make money for long-term investors given that the share price is substantially below analysts consensus price target of $305 per share.

Although the company had previously enjoyed a series of market-beating quarters, guidance has been lowered looking forward. The double-digit revenue growth and broader subscriber base wasn’t enough to stave off concerns of looming and deteriorating macro conditions.

Though the company beat earnings estimates for Q1, the deepening net loss is concerning. Nonetheless, management has continued to develop partnerships and enhance its platform, but investors are looking for more short-term answers.

Wall Street believes MongoDB can make investors millionaires, but there are still lingering doubts about the company’s long-term prospects. However, if economic conditions lift, MongoDB investors could be poised to capitalize.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.