If the 25% drop after their Q1 earnings didn't tell you enough, the further 6% that MongoDB Inc (NASDAQ: MDB) has slid should. At a time when many of the bigger tech companies out there are back trading near, if not at, all-time highs, this was not good.
Investors would already have been feeling the pinch since MongoDB shares began slipping in early February, as their multi-month rally came to an end. Having lost more than 75% in the selloff following 2021's all-time high, the recovery story had been building potential. However, a run of negative updates meant that while the likes of corporate software peer Salesforce Inc (NYSE: CRM) were hitting a high in March, MongoDB was starting what has now become a 55% haircut.
MongoDB's Strong Earnings But Weak Guidance
The latest twist of the knife came from the company's Q1 earnings, which were released last week. While the data giant managed to top expectations for both topline revenue and bottom-line earnings, its forward guidance was well off the mark.
Despite posting solid year-over-year revenue growth of 22% for the previous quarter, the company is now expecting $460 million to $464 million for Q2, which missed the consensus expectation of $471 million. This deceleration warning was echoed in management's forward guidance for their Q2 earnings, too, with them now expected to land between $0.46 and $0.49, against the previous consensus of $0.57.
As CEO Dev Ittycheria said with the release, "We had a slower than expected start to the year for both Atlas consumption growth and new workload wins, which will have a downstream impact for the remainder of fiscal 2025."
Golden Entry Opportunity for MongoDB Investors
However, those of us on the sidelines could be looking at a golden entry opportunity. While the poor forward guidance would usually be enough to warrant multiple analyst downgrades and calls for the stock to be avoided at all costs, the opposite is the case with MongoDB.
Within a day of last week's release, multiple analysts were out reiterating their Buy and Outperform ratings and calling this a "buy the dip" opportunity. Stifel, for example, acknowledged the "consumption slowdown," which had materialized as a significant headwind, but they still see the company maintaining year-over-year revenue growth of 20% into 2025 and beyond. While they trimmed their price target back to $300 as part of their Buy reiteration, that's still pointing to a targeted upside of some 30% from where MongoDB shares were trading going into the weekend.
It was a similar story with the team at Loop Capital, who also reiterated their Buy rating while trimming their price target back to $325. In a note to investors, they spoke to MongoDB, remaining one of the strongest growth stories out there, and their targeted 40% upside speaks volumes about this. In fact, some analysts who had previously been bearish on MongoDB took the opportunity to change their outlook.
Seize the Rare Investment Opportunity in MongoDB
Guggenheim was one of those few teams that actually had MongoDB rated a Sell before their latest earnings report but who saw fit to upgrade them to a Neutral in the aftermath. All told, there were at least 14 upgrades or Buy reiterations in the days following the release, with the highest refreshed price target being the $380 from JMP Securities. The potential 65% upside might be too enticing for investors to ignore. Such opportunities are rare, making it hard to pass up this chance.
Some readers may find the fact that shares have yet to bottom out off-putting, so as a starting point, look for them to put in a strong close where they finish at or near their high of the day. This could signal that the bears are losing control and that momentum is swinging around to the bulls.
