MongoDB Earnings: Shares Approaching Our Fair Value Estimate as Management Ups Their Guidance

Key Morningstar Metrics for MongoDB

• Fair Value Estimate: $330.00
• Morningstar Rating: 4 stars
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: High

What We Thought of MongoDB’s Earnings

MongoDB MDB posted a stellar quarter, well exceeding our non-GAAP EPS forecast and the high end of management’s guidance. While shares are moving nicely toward our reiterated fair value estimate of $330 per share (after all-around upped guidance for the year), we still think the name has an attractive upside. In our view, MongoDB remains a top pick for investors who want ample exposure to long-term beneficiaries of artificial intelligence.

Second-quarter revenue increased 13% year over year to $478 million. While consumption-based revenue came in slightly above management’s expectations, the firm was careful to note that its consumption-based revenue is still seeing a significant headwind from macroeconomic conditions. Nonetheless, sales productivity and healthy new business led to solid relative results, particularly in Atlas and Enterprise Advanced.

Second-quarter non-GAAP gross margins were 75%, down 3 points from the prior-year period, due to a lower mix of upfront high-margin license revenue and a higher mix of lower-margin Atlas business. We remind investors that in the prior-year period, management warned that its non-GAAP profitability likely wouldn’t be repeated, since it resulted from a perfect storm. Still, non-GAAP earnings per share were $0.70, significantly above our estimates and management’s outlook on favorable operating profitability due to revenue outperformance. Encouragingly, the sizable effect on margins from a mild revenue beat showcases the outsize benefits scale will have on MongoDB’s bottom line.