MongoDB Stock Forecast: Are 60 Million Users Wrong?
Originally posted on https://financhill.com/blog/investing/mongodb-stock-forecast
MongoDB Stock Forecast: Each time a business has contact with a customer, the interaction generates a collection of data. This includes website visits, purchases, and requests for support.
In a single day, businesses gather millions of pieces of information. Though it is far too much for a human to organize and analyze, advanced technology can now sort through the data to identify trends and provide insights that were never available before.
Smart companies are making the most of Big Data, applying these insights in their strategic planning and business operations. However, the sheer volume of incoming information has made traditional databases obsolete.
MongoDB offers an alternative solution for collecting and sorting data, and it has successfully launched its design in organizations around the world.
Many investors are asking whether now is the time to buy stock in MongoDB. Will it continue to be a leader due to its unique Big Data solutions, or is newer technology poised to take its place?
MongoDB Business Model
Those outside of the IT world might be puzzled by the option of purchasing MongoDB stock.
After all, isn’t that the name of a software platform? In fact, the company known as MongoDB today was founded in 2007 under the name 10gen. MongoDB [NASDAQ: MDB] was the name of a Platform as a Service (PaaS) product that 10gen had in development.
The company transitioned to an open source development model in 2009, expanding its services to include commercial support. In 2013, 10gen changed its name to MongoDB, and the company went public on October 20, 2017.
The MongoDB platform is, at its most basic, a general purpose database. However, it operates quite differently from traditional databases.
Instead of storing data in tables made up of rows and columns, it stores collections of documents. This is a critical distinction when dealing with data coming in from a variety of sources, because MongoDB [NASDAQ: MDB] doesn’t require specific formatting or the completion of specific fields.
Developers frequently choose MongoDB when there is a need for the following functionality:
- Single View – real-time view of all collected data
- Mobile App – supports the design and scaling of apps
- Personalization – ensures all users can access relevant content
- Content Management – stores and presents all types of content, regardless of format
- Internet of Things (IoT) – collects and analyzes sensor data
- Real-Time Analytics – offers analytics that keep up with incoming data
- Cataloging – simplifies product cataloging
- Mainframe Offload – supports the transfer of workload from the mainframe
MongoDB [NASDAQ: MDB] is easy to install and implement, and it scales automatically, which is critical in the age of Big Data and the cloud.
As a company, MongoDB is more than just software. After all, the platform is open source and free for anyone to use. However, MongoDB brings experts in to examine individual business needs, design customized solutions, and support implementation of the system.
MongoDB consultants assist with cloud migration, create management platforms, provide technical support, deliver training, and offer on-going customer service to clients. These services are critical to the successful collection, storage, and analysis of data, and MongoDB boasts a client list of top-tier companies like Cisco, Genomics England, and Bosch.
The Risks and Benefits of Buying MongoDB
MongoDB [NASDAQ: MDB] clearly fits into the category of tech stocks, and since its IPO, investors have treated it like a growth stock.
Analysts have indicated that the company is likely to increase sales quickly, though perhaps not profitably in the short term. In general, shares have traded briskly based on predictions that sales will quadruple over the next five years. However, a sudden 6.6 percent drop has new investors questioning whether MongoDB is a smart buy.
The interesting thing about the recent drop in MongoDB share price is that it doesn’t appear to be connected with any specific event or piece of news. What it is connected with is other, similarly-situated tech/growth stocks. Several companies in this category went down simultaneously, without any explanation.
Stocks that fall into the tech/growth category tend to trade on their potential. Despite lack of profits, MongoDB sells at approximately 23 times its annual sales.
If MongoBD can grow sales as quickly as expected, investors are likely to be rewarded – but if something goes wrong, stock values may lose value suddenly and sharply.
If, in fact, the across-the-board drop in tech/growth stock is the start of a trend, it may be that investors are starting to see signs of coming changes in the market.
With economists hinting that a recession isn’t far off, investing in companies that don’t generate profits could be a costly mistake – even if the pace of growth is rapid. So, the question is whether MongoDB is on-track for profitability in a reasonable timeframe?
MongoDB Stock Forecast: Is It A Buy?
In the most recent quarter, MongoDB [NASDAQ: MDB] proved that its products and services are in high demand.
The customer base has doubled in the past year, from 7,400 to 15,000, and year-over-year, quarterly revenues grew 67 percent to $99.4 million. Most of that gain resulted from the 71 percent increase in subscription revenue.
Of particular interest is the increase in subscription revenue today as compared to revenue from the same customers last year – the net annual recurring revenue expansion rate. This figure topped 120 percent, marking the 18th consecutive quarter of an NARR at 120 percent or more.
Unfortunately, operating income isn’t looking quite as good. At the same time last year, the figure came in at ($27.1 million). In the most recent quarter, that was down to ($37.7 million). However, things may be looking up.
As mentioned, MongoDB is free software, and to date, more than 60 million users have completed downloads. The good news for investors is that business leaders have a plan in the works to convert a sizable chunk of those users to paying subscribers – a giant step towards profitability.
Business leaders predict revenue between $390 million and $395 million for fiscal 2020, which is an increase of 4 percent. Should the company hit this target, it would represent year-over-year growth of 49 percent.
All in all, despite concerns about an economic slowdown, MongoDB has the hallmarks of a solid buy for growth investors.