MongoDB stock drops as Street hopes ‘derisked’ forecast allows better focus on sales strategy

Late Wednesday, the database company forecast revenue of $344 million to $348 million for the current quarter and $1.48 billion to $1.51 billion for the year, while analysts surveyed by FactSet expected revenue of $354.7 million and $1.59 billion for the quarter and year, respectively.

Mizuho analyst Matthew Broome said he was holding on to his neutral rating on the stock and reduced his price target to $180 from $220 as “disappointing consumption trends” weighed on the company’s forecast.

Broome said he welcomed the company’s expense management plans of raising the return-on-investment bar on projects and slowing down hiring across sales and product development.

Such developments “better align with our view that MongoDB should be more focused on sales and marketing initiatives that can move the needle (in terms of new workload acquisition), rather than product development efforts that bring negligible differentiation or value to mainstream customers,” Broome said.

Guggenheim analyst Howard Ma, who has a neutral rating, in a note titled “Derisked Now, But Humongo Deceleration,” said he estimated that MongoDB’s forecast implied a 40% decline in new annual recurring revenue for fiscal 2024.

“The bottom line is that guidance is now derisked, but even if MongoDB ultimately achieves the 28% growth in FY24 we believe it can do, that still represents material deceleration vs. 47% growth in FY23,” Ma said.

Of the 28 analysts who cover MongoDB, 22 have buy-grade ratings and six have hold ratings, along with an average price target of $245.56, according to FactSet data.