AI Will Help Programmers Build Applications Faster on MongoDB’s (MDB) Platform

Stock (Symbol)

MongoDB (MDB)

Stock Price

$328

Sector

Data is as of

Expected to Report

Company Description

The Company’s platform enables developers to build and modernize applications across a range of use cases in the cloud, on-premise or in a hybrid environment.

The Company’s lead offerings are MongoDB Atlas and MongoDB Enterprise Advanced. MongoDB Atlas is its hosted multi-cloud database-as-a-service (DBaaS) offering that includes infrastructure and management of its database.

MongoDB Enterprise Advanced is its commercial database server offering for enterprise customers that can run in the cloud, on-premise or in a hybrid environment.

Its MongoDB application data platform’s complementary services and products include MongoDB Atlas Search, MongoDB Atlas Data Lake, MongoDB Charts and MongoDB Realm.

The Company provides professional services to its customers, including consulting and training. It has over 33,000 customers spanning a range of industries in more than 100 countries around the world. Source: Refinitiv

Sharek’s Take

Here are some highlights as of last qtr:

• Subscription revenue rose 40%, and accounted for 96% of total revenue.
• Professional services revenue grew 20%, and represented 4% of total sales.
• Net annual recurring revenue grew above 120%.
• Customer count grew to over 45,000, up from 37,000 a year ago (22% growth).
• New customers numbered at 1,900.
• Direct sales customers grew to over 6,800 versus more than 5,400 a year ago (26% growth).
• Atlas customers grew to 43,500, up from 35,500 a year ago (23% growth)
• Customers with more than $100,000 in annual contract value grew to 1,855 from 1,462 a year ago (27% growth).

MongoDB is a database platform that helps software developers build internet applications that utilize vast volumes of data, while improving developer productivity (which developers like). MDB’s architecture makes it easy for developers to manage data and to build and maintain applications. So companies might decide to use this software at the IT guy’s request; it makes their job easier. During 2017-2020, developers ranked MDB as the #1 database they wanted to work with (Source: Stack Overflow Annual Developer Survey). As of April 30, 2022, MDB had over 40,000 customers spanning a wide range of industries in more than 100 countries around the world, and no single customer represented more than 10% of the company’s total revenue. MDB has business partnerships with all three major cloud providers (Amazon Web Service, Google Cloud Platform and Microsoft Azure), as well as with independent software vendors and global systems integrators including IBM, Accenture, Infosys, Confluent, and many others.

MDB’s portfolio is based around cloud (Atlas) and non-cloud (Enterprise Advanced) products:

• Enterprise Advanced: It is the company’s proprietary commercial database server offering for enterprise customers that can run in the cloud, on-premise or in a hybrid environment. MDB also offers consulting and training for its database platform to make customers’ applications a success.
• Community Server: It is a free-to-download version of MDB’s database that includes the core functionality that developers need to get started with the database, but not all of the features of the commercial platforms. Developers become familiar with MDB by using this free version, then tell others in the organization about the benefits of the platform. The Community Server has been downloaded over 155 million times from the company’s website since February 2009.
• MDB Atlas: Atlas allows customers to use MDB as a service on the cloud, so they don’t have to manage the database. It also enables customers to run their applications across multiple clouds including Amazon Web Services, Google Cloud, and Microsoft Azure at the same time. Atlas was 65% of total revenue last qtr, up from 60% the prior year.

Last qtr, MDB launched several new offerings:

• Atlas Vector Search, which simplifies generative AI and semantic search functionalities for new applications.
• Atlas Stream Processing, which provides a differentiated way of processing streaming data to help build real-time, event-driven applications.
• General availability of Relational Migrator, which helps migrate users to MDB’s platform from legacy databases.
• Atlas for Industries, a new set of programs and integrated solutions to support industries across different sectors.

MongoDB claims its different than other software companies as it starts a new relationship with the first workload, then acquires more workloads over time. But the stock is expensive, as investors are aware of this and are aware more revenue is coming. The stock has a 166 P/E this quarter. On a price-to-revenue basis, the stock sells for 14x 2023 revenue estimates, or $328 per share. My Fair Value is 15x revenue or $340. MDB had one of the best quarters of any stock I follow and I will add the shares to the Growth Portfolio. I imagine the stock will rise at the rate annual revenue does moving forward. That may be 25% to 35% a year.

One Year Chart

Quarterly profit growth has been excellent the past four quarters. Estimates for next quarter are great but comparisons get tougher 2QtrsOut.

The P/E is high at 140, but profits are jumping so fast investors are thinking ahead.

Earnings Table

Last qtr, MongoDB delivered 504% profit growth and beat estimates of 300% growth. Revenue increased 40% against estimates of 29%.

Atlas revenue growth was driven by improved consumption while non-Atlas revenue growth, specifically for Enterprise Advance (EA), was driven by an increased number of multi-year deals and strong licensing revenues. MDB benefited from additional workload acquisitions from existing customers as well as new business wins with 1,900 new customers last qtr. Business wins include the adoption of companies such as Renault, Hootsuite, Ford, Cathay Pacific, Foot Locker, MarketAccess, Powerledger, Wells Fargo and System1.

Annual Profit Estimates have been jumping higher. Management raised its revenue outlook for 2024 from $1.5 billion to $1.6 billion, representing 25% growth year-over-year. Management also raised their estimates for non-Atlas revenues for the rest of the year, but they expect growth to be offset by difficult comparisons.

Qtrly Profit Estimates are for 122%, -35%, 2%, and -20% the next 4 qtrs. Management expects a sequential decline in non-Atlas revenues next qtr as they do not expect the same level of business activity, particularly with licensing deals. Last quarter MDB had a lot of licensing revenue. Licensing revenues contains large upfront, boosting margins, but management does not expect to repeat this performance in the next qtrs. Analysts expect revenue to grow 21% next quarter.

Fair Value

This qtr, MDB sells for 14x 2023 revenue estimates. My Fair Value is 15x revenue, which is $339 a share

Current qtr:
14 x $1.6 billion rev = $23 billion market cap
$23 billion / 71 million shares = $328

2023 Fair Value:
15 x $1.6 billion rev= $24 billion market cap
$24 billion / 71 million shares = $340
Upside/Downside: +4%

2024 Fair Value:
15 x $2.0 billion rev= $30 billion market cap
$30 billion / 71 million shares = $416
Upside/Downside: +27%

Bottom Line

MongoDB (MDB) opened for trading at $33 in October 2017 and went parabolic. It eventually peaked at $590 in November 2021. Then the stock came tumbling down and bottomed at $135 in November 2022. The stock recently surged up to $400 and has settled back to the $330 range with the stock market in a correction.

MongoDB is the database platform programmers use. And AI will bring more business its way. This looks like one of the top tech stocks to own, but with a high P/E the shares can be especially volatile and perhaps risky.

MDB will be added to the Growth Portfolio. The stock will rank 17th in the Power Rankings.

Power Rankings

17 of 30

Aggressive Growth Portfolio

N/A

Conservative Stock Portfolio

N/A