What Happened:
Shares of database software company MongoDB (MDB) jumped 5.1% in the morning session as major indices soared and yields declined after the Bureau of Labour Statistics reported CPI (Consumer Price Index - a gauge of the average price consumers pay for goods and services) for the month of May 2024 came in better than expected at 3.3% year on year (versus analysts’ expectations for 3.4%). The data also revealed that inflation was flat (unchanged) month on month.
The inflation results benefitted from a 2% decline in the energy index, while shelter inflation remained sticky (up 0.4% m/m and 5.4% y/y).
Sticky inflation is exactly what has delayed the Fed’s planned rate cuts in 2024, with some market participants likely worried that inflation might stay higher for longer. Today’s report eased those worries a bit.
As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. With lower interest rates, investors can apply higher valuations to their stocks. No wonder so many in the investment community are optimistic about 2024. We at StockStory remain cautious, as following the crowd can lead to adverse outcomes. During times like this, it's best to own high-quality, cash-flowing companies that can weather the ups and downs of the market.
Is now the time to buy MongoDB? Access our full analysis report here, it's free.
What is the market telling us:
MongoDB's shares are very volatile and over the last year have had 20 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 3 months ago, when the stock dropped 13.9% on the news that the company reported fourth-quarter results and provided revenue guidance for the next quarter and full year, which fell below Wall Street's expectations, suggesting a slowdown in demand. In addition, while free cash flow was positive, it came in below expectations. It is important to note that the topline guidance reflected tough comps, with MongoDB expected to recognize close to zero revenue from unused Atlas commitments in FY'25 ( vs. over $40 million in FY'24).
Similarly, the profitability outlook was also underwhelmed, with non-GAAP operating income projections for the next quarter and full year falling below expectations. Margins were expected to be impacted by an acceleration in hiring as the company highlighted slow capacity expansion in FY'24, especially in the first half due to macro uncertainty.
On the other hand, MongoDB exceeded analysts' revenue expectations. Overall, this was a mixed but weaker quarter for MongoDB.
MongoDB is down 39.1% since the beginning of the year, and at $233.75 per share it is trading 53.3% below its 52-week high of $500.90 from February 2024. Investors who bought $1,000 worth of MongoDB's shares 5 years ago would now be looking at an investment worth $1,405.
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