MongoDB's (NASDAQ: MDB) share price slipped following the FQ3 release, which provided a classic dip buying opportunity. A business contraction didn’t cause the move, lack of growth, or weakness in the results of any kind, but rather, it was caused by the departure of long-time CFO Michael Gordon. His departure negatively affects the market because it raises questions about future execution, but those doubts are likely unfounded. MongoDB is a high-quality operation and a desirable employer who should have no trouble filling the void.
Regarding execution, the company is firing on all cylinders in 2024, executing its shift to next-gen technologies while increasing its client count and deepening penetration. The critical takeaways from the report are that revenue is growing, the company shows significant strength, the margin is stable, the cash flow is positive, the balance sheet is strengthening, and the guidance is improved.
MongoDB's Developer Data Platform Is in High Demand
MongoDB’s developer-centric database platform is in high demand because it provides a comprehensive set of tools that are well-suited for and powered by AI. The company’s $529.38 million in Q3 revenue is up 22% year-over-year, outpacing MarketBeat’s reported consensus by 700 basis points because of it. Strength was seen in the number of clients served, with growth centered on the core Atlas segment. Atlas, a cloud service compatible with all major hyperscalers, simplifies the deployment and management of databases and grew by 26%, accounting for 68% of revenue. Segmentally, Subscriptions grew by 22% and services by 18%.
The margin news is also strong. The company sustained its margin compared to last year, significantly outperforming the analysts' consensus as revenue leverage combined with spending discipline to drive results. The gross margin contracted by 100 basis points but was offset by gains in operating results. The adjusted net income margin improved by roughly 25 basis points to drive leveraged results on the bottom line. The GAAP results continue to show losses, but the losses are shrinking and will soon disappear; the adjusted net income is up 25% to $98.1 million compared to last year, which is about 18.5% of revenue.
The guidance is the best news of the strong report and central to why this stock will rebound soon and trend higher in 2025. The company raised its guidance for Q4 and the year, setting the low end of the revenue and earnings ranges well above the consensus forecasts. The trends suggest that guidance is cautious, and analysts respond favorably.
Analysts Lift Targets for MongoDB, See Stock Rising in 2025
The analysts are bullish on MongoDB stock and are lifting their price targets following the release. MarketBeat tracked eight revisions within the first 24 hours of the report, and they all forecasted that this stock would trade above the consensus. The average target of the eight revisions is nearly $380 compared to the $357 consensus, lifting the consensus by 7% overnight and implying a 20% price increase from the critical support level.
The critical support level for this tech stock is near $312.50. It is significant because it is a previous point of support compounded by a cluster of moving averages. The moving averages are significant because they represent near-term and short-term traders and long-term investors and show their sentiment aligning. More importantly, the 30-day and 150-day EMAs are forming a Golden Crossover, a strong technical signal for higher prices. The market should begin to rebound quickly in this scenario; if it doesn’t, a move to retest support in the low end of the two-year trading range is possible.
