After the company reported strong third-quarter earnings on Monday, December 6th, shares of document database company MongoDB surged 12.8% over the past week.
Like other high-growth tech stocks, MongoDB sold off before earnings. One of the few high-growth software companies reporting strong enough results to mitigate concerns over higher interest rates is MongoDB.
After this week's surge, the stock is only 4% below all-time highs, but it is still a relative winner at a time when many other companies are 20%, 40%, or even more below their all-time highs.
The image is from the same source.
MongoDB grew revenue by 50% in the last quarter. Its negative bottom line came in better than expected, even though its net losses widened.
A lot of high-growth software stocks have beaten expectations this earnings season and are still selling off. What was the difference between the two? The growth rate is increasing, rather than the decelerating growth seen by many of its peers.
MDB revenue data by YCharts.
How is it done? It looks like it is a pretty disruptive product to the database industry. The CEO said in the release:
The early, but growing, trend of customers choosing MongoDB as an enterprise standard for their future application development is a key driver of our success. Our success across industries and a wide variety of use cases puts us in a great position to build even deeper relationships with our customers over time.
The cloud database platform, MongoDB Atlas, is taking over as the majority of revenue, and it's growing much faster. Atlas revenue rose a whopping 84% in the last quarter.
When a higher-growth product or segment begins to overtake a slower-growth segment within a company, results can accelerate and stock prices follow.
MongoDB is not a cheap stock. It's vulnerable to rising interest rates next year because shares go for 40 times sales. MongoDB seems to be differentiating itself in a huge market, and also seems to be executing well.
It's hard to recommend a stock that's expensive, but MongoDB has never been cheap. Long-term investors without a position may want to dive deeper into MongoDB today, and keep an eye out for any further valuation-driven pullbacks.
The writer of this article may disagree with the official recommendation position of a premium advisory service. We are motley! Asking an investing thesis helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
