Is MongoDB’s Stock Rally Over?

Is MongoDB’s Stock Rally Over?

MongoDB’s stock (NASDAQ: MDB) has moderate upside left based on its valuation, after it rallied from $126 to $211 since March 23rd compared to the S&P which moved 51%. One of the reasons for the high recovery was the Fed’s multi-billion dollar stimulus package announced on March 23rd which lifted market sentiments. MongoDB which provides a platform to enable developers to build applications across a broad range of use cases, is benefiting from a shift toward digital transformation and cloud migration. The company saw a strong Q1 2021 (ended April 2020) results as Total revenue and gross profit margin improved.

MongoDB’s stock was at an all-time high around June after recovering from the drop in February and March due to the coronavirus outbreak becoming a pandemic. Due to the pandemic, demand and revenues will likely be higher than last year which we believe the stock has factored in, and we see a moderate upside potential remaining in the near term.

The company rose 128% in share price since the end of FY 2019 (ended January 2019). Some of this rise over the last year was due to the 58% increase seen in MongoDB’s revenues from FY 2019, while its net loss margin decreased from -51% in FY 2019 to -42% in FY 2020.

The company has seen a good revenue growth over recent years, while its P/S (price-to-sales) multiple has also risen. We believe the stock has a moderate upside left after the recent rally. Our dashboard What Factors Drove 127% Change In MongoDB Stock Between FY 2019 And Now? has the underlying numbers.

 MDB’s P/S multiple rose from 18x in FY 2019 to around 22x in FY 2020. The company’s P/S has now risen to around 28x amid the demand seen during the pandemic.

Effect of Coronavirus

The global spread of coronavirus has led to lockdown in various cities across the globe, which has affected industrial and economic activity. Due to a shift toward digital transformation and cloud migration. MongoDB saw a rise of 46% y-o-y in Total revenue for Q1 2021 (ended April 2020) with subscription revenues up by 49%. The company had more than 18,400 customers at the end of the quarter, up by 8% compared to the Q4 2020 (ended January 2020).

Over the coming weeks, we expect continued improvement in demand and subdued growth in the number of new Covid-19 cases in the U.S. to buoy market expectations. Following the Fed stimulus — which set a floor on fear — the market has been willing to “look through” the current weak period and take a longer-term view. With investors focusing their attention on 2021 results, the valuations become important in finding value.

While MongoDB’s stock might offer a moderate upside to potential investors, what if you’re looking for a more balanced portfolio instead? Here’s a top quality portfolio to outperform the market, with over 100% return since 2016, versus 55% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk. It has outperformed the broader market year after year, consistently.

 

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