MongoDB Shares Fall 20% Year to Date: How Should You Play the Stock?

Core Viewpoint - MongoDB (MDB) has underperformed in the market, with a year-to-date decline of 20.4%, contrasting with the broader sector's growth of 27.2% [1]. Group 1: Stock Performance - MDB shares have lagged behind the Zacks Internet Software industry and peers such as Samsara, Fortinet, and Cognyte Software, which have seen returns of 60.9%, 60.7%, and 23.8% respectively [1]. - The overall industry has appreciated by 31.9% year-to-date [1]. Group 2: Factors Affecting Performance - The underperformance of MDB stock is attributed to sluggish macroeconomic conditions, a slowdown in software sector spending, and intense competition in the Internet software market [2]. Group 3: Growth Opportunities - MongoDB's expanding clientele and product offerings are seen as positive indicators for future growth [3]. - A recent partnership with Microsoft aims to integrate AI and data analytics, enhancing user capabilities and driving top-line growth [4][5]. - The launch of MongoDB 8.0 is expected to improve database offerings, enhancing throughput by 32% and accelerating time series data aggregations by over 200% [6][7]. Group 4: Financial Outlook - For fiscal 2025, MongoDB expects non-GAAP earnings to be between $2.33 and $2.47 per share, with a projected non-GAAP income from operations of $187 to $195 million [8]. - The consensus estimate for fiscal 2025 earnings is $2.43 per share, indicating a year-over-year decline of 27.03% [8]. - The Zacks Consensus Estimate for third-quarter fiscal 2025 earnings is 69 cents per share, reflecting a year-over-year decline of 28.13% [9]. - MongoDB anticipates revenues between $1.9 billion and $1.93 billion for fiscal 2025, with a consensus estimate of $1.93 billion indicating a year-over-year growth of 14.52% [11]. Group 5: Valuation Concerns - MDB shares are trading at a premium, with a Value Score of F, and a forward 12-month Price/Sales (P/S) ratio of 10.91X, higher than the sector's 6.1X [12]. - Currently, MongoDB holds a Zacks Rank 3 (Hold), suggesting that investors should wait for a more favorable entry point [13].