On Friday, Piper Sandler adjusted its outlook on MongoDB , Inc. (NASDAQ:MDB) shares by reducing the price target to $350 from the previous $480 while retaining an Overweight rating on the stock.
The revision comes as MongoDB and other enterprise software vendors, such as Workday (NASDAQ:WDAY), Salesforce (NYSE:CRM), and Veeva Systems (NYSE:VEEV), have recently announced lower full-year guidance due to macroeconomic challenges and AI budgetary pressures.
The analyst from Piper Sandler stated that the second half (2H) growth expectations for MongoDB have been revised downward to 10%, a decrease from the previously anticipated 15%.
This change is attributed to weaker consumption trends which may affect the growth rate of MongoDB's Atlas (NYSE:ATCO) cloud database, now projected at 20% for the latter half of the year, down from an earlier estimate of 25%.
In light of these developments, the price target adjustment reflects not only the lowered growth estimates but also a reduction in the target enterprise value to free cash flow (EV/FCF) multiple, now set at 30 times compared to the previous 32 times. This change is due to increased execution risks in the current economic environment.
Despite the downward revision, the analyst sees a silver lining. MongoDB's year-to-date decline of 24%, along with a 26% after-market (AMC) sell-off, has pushed the stock price below $230, which contrasts sharply with its entry point into 2024 at $408.85.
According to the analyst, this drop presents a more attractive risk-reward balance, and they advocate purchasing MongoDB shares at the current level, which is trading at 8.2 times the calendar year 2025 estimated enterprise value to sales (EV/S), close to the five-year low of 7.1 times.
InvestingPro Insights
As MongoDB, Inc. navigates through a challenging economic landscape, real-time metrics and expert analysis become crucial for investors to make informed decisions. According to InvestingPro data, MongoDB's market capitalization stands at $22.74 billion, reflecting the scale of the company in the competitive tech sector. Despite facing a challenging period, with a price-to-earnings (P/E) ratio of -125.23 and a recent price drop, MongoDB's revenue growth remains strong at 31.07% over the last twelve months as of Q4 2024, underscoring the underlying business strength.
InvestingPro Tips suggest that MongoDB's net income is expected to grow this year, and the stock is currently trading near its 52-week low, indicating a potential entry point for value-seeking investors. Moreover, the stock's Relative Strength Index (RSI) suggests it is in oversold territory, which could appeal to those looking to capitalize on market overreactions.
For those interested in a deeper dive into MongoDB's financial health and future prospects, InvestingPro offers additional tips, including the company's valuation multiples and debt levels. Investors can access these insights by visiting InvestingPro's dedicated page for MongoDB. Additionally, by using the coupon code PRONEWS24, investors can get an extra 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking a wealth of information to guide their investment strategies.
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