MongoDB Inc (NASDAQ:MDB)’s third-quarter numbers were solid evidence that reports of its demise have been greatly exaggerated, according to analysts at Canaccord.
The “sizeable beat-and-raise paired with encouraging commentary on a rebound in consumption should help to reassure investors that much of Q2's softness was, in fact, seasonal," the broker suggested. It was certainly warmly received by investors with its share price powering 22% higher.
The software company’s long-term opportunity remains compelling, analysts wrote, highlighting three particulars areas: 1) the company is still early (~2%) in penetrating a >$100bn database market; 2) the heterogeneity of data and velocity of data creation create a secular shift towards non-relational databases, and; 3) as the first legitimate general purpose non-relational database, the company occupies a unique position of strength.
“Our long-term conviction hasn't changed, but it helps when that conviction isn't battling short-term fears of rapid deceleration, and to that end, Q3's data points were encouraging” it said.
For a generational technology company with potential to grow the top-line by 30%+ for the foreseeable future the valuation appears attractive, Canaccord said.
The broker reiterated a 'Buy' rating but lowered its price target to $270 from $300, which reflects 13x current year estimated 2023 sales which it felt was justified for a category leader with revenue upside potential in this market.
Contact the author at jeremy@proactiveinvestors.com