What Happened:
Shares of database software company MongoDB (MDB) jumped 5.1% in the afternoon session as yields fell after the U.S. Treasury Department lowered the borrowing estimate for the first quarter of 2024. According to a press release, the Treasury Department is expected to borrow $760 billion, $55 billion lower than the $815 billion estimate provided in October 2023, due to "projections of higher net fiscal flows and a higher beginning of quarter cash balance."
Stocks have trended higher since late 2023 as market participants anticipated that the Fed would begin to cut rates in 2024, after recent economic data showed that inflation is cooling off. The first policy decision will be announced on January 31, 2024, with the consensus expectation for rates to remain steady at 5.25%-5.5%.
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.
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What is the market telling us:
MongoDB's shares are very volatile and over the last year have had 26 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 8 months ago, when the stock gained 16.5% on the news that the company reported a "beat and raise" quarter. First quarter results beat analysts' expectations for revenue, gross margin, free cash flow, and earnings per share. Guidance was also strong. Revenue guidance for the next quarter exceeded expectations. The full year guidance was raised and also came in ahead of Consensus. The profitability guidance was similarly impressive as operating income guidance for the next quarter and full year came in ahead. The company touched on the current AI trend noting that "...MongoDB's developer data platform is well positioned to benefit from the next wave of AI applications in the years to come". Overall it was a strong quarter for the company with solid results and impressive guidance.
MongoDB is up 9.2% since the beginning of the year, and at $418.92 per share it is trading close to its 52-week high of $435.23 from November 2023. Investors who bought $1,000 worth of MongoDB's shares 5 years ago would now be looking at an investment worth $4,817.
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