MongoDB: It’s No Trick, This AI Play Is a Treat
MongoDB (NASDAQ: MDB) was on track to end October as the Most Upgraded stock, as tracked by MarketBeat. The only reason it didn’t is that Alphabet reported its earnings on Oct. 30, outperforming the consensus, providing solid guidance, and sparking a round of bullish analyst revisions. The takeaway is that MongoDB, once in the doghouse because it wasn’t living up to AI-inflated expectations, is back in favor.
The data reveals a significant shift in the outlook, reflected in the stock’s price, and a catalyst ahead to drive another improvement in market sentiment.
The catalyst is the Q3 earnings release scheduled for early December. The analysts are optimistic following the Q2 release, which revealed momentum and better-than-expected guidance. As it stands in early November, the consensus forecast is for tepid sequential growth and year-over-year (YOY) growth to slow to the low double digits.
However, the revision trend suggests outperformance is likely; the question is by how much. Based on the trends and last quarter's report, the $1 million sequential gain is expected to be outperformed by several hundred basis points with quarterly strength compounded by favorable guidance.
MongoDB Analysts Signals Shift in Sentiment
MarketBeat’s analyst data reveals strong and growing support for MongoDB. The 39 tracked analysts rate the stock as a consensus Moderate Buy. Coverage is on the rise, the bias is to the upside, and sentiment is firming.
More than 75% of the targets are pegged at Buy or equivalent; recent revisions included several upgrades and numerous price target revisions, with the consensus providing support in early December and the high-end pointing to another 25% increase.
Among the most recent reports is the initiation of coverage at Wells Fargo. The firm initiated coverage of the stock at Overweight and set a Street-high target of $430, citing factors such as agentic coding, software development, and the proliferation of agents running on the platform.
In their view, not only is the development of agents accelerating, but those in effect are on the verge of scaling. This provides a significant growth lever for the business that the market underappreciates.
MongoDB’s Chart Reflects Rapidly Improving Sentiment
MongoDB’s stock price has been and remains range-bound. However, the Q3 action reflects the rapidly improving sentiment, suggesting that this market is on track for higher prices. Not only does the action reveal a bottom at the range’s low end, but the subsequent updraft is robust, driven by a record-high volume spike and compounded by bullish indications in the MACD and stochastic.
The price action in late October formed what appears to be a Bullish Flag and continuation pattern, but there is a risk.
The risk is the resistance targets. While MDB’s stock price broke out from its flag pattern bullishly and set a new closing high, it remains below a critical resistance target that could cap gains until a potent catalyst emerges. In this scenario, MDB’s stock price can advance to $370 but may struggle to move above that level until the earnings release.
Valuation Concerns? MongoDB Is a Value Relative to Low-Ball Estimates
There is some concern about valuation, given that the stock is trading at 93x its current-year earnings outlook, but it is pricing in robust growth. MongoDB’s consensus forecasts low-teens revenue growth, wider margins, and accelerated earnings growth over the next decade.
The earnings per share compound annual growth rate is expected to be in the low $20s, placing the stock at approximately 12x its 2035 forecast, which is likely conservative. In this scenario, MDB’s stock price could advance 100% to 200% from its early November levels to align with the broader market and other established tech companies that deliver profits and profitable growth.
Valuation concerns or not, the institutions are heavily exposed to this stock and have been buying on balance since Q2. The Q1 activity included significant sales, which align with the stock’s price drop.
The activity since then has been robust, accumulating shares at approximately $2 for each $1 sold, and aligns with the stock’s rebound. Assuming this trend continues, the institutional activity alone is enough to keep this stock’s price moving higher.
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