MongoDB MDB released its third-quarter earnings report on Dec. 9. Here’s Morningstar’s take on MongoDB’s earnings and stock.
Key Morningstar Metrics for MongoDB
- Fair Value Estimate: USD290.00
- Morningstar Rating: 3 stars
- Economic Moat: None Morningstar Uncertainty Rating: High
What We Thought of MongoDB’s Q3 Earnings
- MongoDB MDB reported excellent fiscal third-quarter results, easily beating FactSet consensus revenue estimates by 6% and prior guidance by 7% while roughly doubling the quarter’s non-GAAP earnings per share guidance. Management increased its full-year revenue and non-GAAP EPS outlook, but we felt the increases here were a bit light.
- Growth was undoubtedly strong in the quarter. Revenue grew 11% sequentially after decelerating in the previous two quarters. We believe MongoDB needs to maintain this type of growth (5% or more sequential and 20% or more yearly growth) for at least several more years to justify its valuation.
- We remain worried that in the coming quarters, this growth rate could decelerate once again. Management’s commentary on Atlas-specific revenue indicated they were close to in line with expectations and are expected to decelerate next quarter. In contrast, most of the current quarter’s outperformance was driven by several large non-Atlas (enterprise advanced) multiyear deals, where term license revenue is recognized at signing.
Fair Value Estimate for MongoDB
With its 3-star rating, we believe MongoDB’s stock is fairly valued compared with our long-term fair value estimate of USD 290 per share. Our valuation implies a forward fiscal-year enterprise value/sales ratio of 11 times. We project that MongoDB will achieve a compound annual growth rate of 19% over the next five years and 18% over the next 10 years. We expect this substantial growth to be driven by workloads continuing to shift to a cloud environment, prompting the database market to grow robustly. On top of this sector-level tailwind, we expect MongoDB to take some share.
Read more about MongoDB’s fair value estimate.
Economic Moat Rating
We do not assign MongoDB a moat. In general, we view the infrastructure SaaS space as fairly competitive. The company is still in its high-growth customer acquisition phase, it is unprofitable, and it’s difficult to discern with a high degree of certainty what its margin profile and returns on invested capital will be 10 years from now.
Read more about MongoDB’s economic moat.
Financial Strength
We think MongoDB is financially stable and that its balance sheet is sound, with adequate cash balances and reasonable debt levels. The company already generates positive free cash flow, although this is driven by heavy use of stock-based compensation. We think MongoDB is rightly avoiding dividends and major share repurchases, as the company is in its growth phase.
Read more about MongoDB’s financial strength.
Risk and Uncertainty
We assign MongoDB a High Morningstar Uncertainty Rating due to its place in a technological landscape that has the potential to shift rapidly, its current place in its life cycle, and the looming threat of competition. Database and technological needs change over time, and MongoDB must continually innovate to maintain an edge. The competitive landscape could also change, as new companies emerge or cloud providers improve their offerings.
Read more about MongoDB’s risk and uncertainty.
MDB Bulls Say
- There are long-term tailwinds in the data space, which could fuel growth for MongoDB.
- If MongoDB can figure out how to monetize features that fit with the AI demand boom, it could be another growth driver.
- MongoDB could expand to other multi-cloud data needs or become a part of the emerging AI tech stack, pushing spending per customer higher and improving revenue growth.
MDB Bears Say
- MongoDB’s growth profile could be worse than expected. If MongoDB can’t reaccelerate growth in fiscal 2026 after a slower 2025, the current valuation seems too rich and there could be significant downside.
- The space is increasingly competitive, and there are other offerings in the marketplace, both from public cloud providers and independent providers.
- There is still a lot of uncertainty about how much revenue attributable to AI MongoDB will ultimately generate.
This article was compiled by Kayleigh Hall.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.