Shares of database software company MongoDB (MDB) jumped 5.2% in the morning session after the announcement that it would join the Nasdaq 100 index. The official inclusion is set for December 18, 2023. This addition to the index may attract interest from mutual funds and ETFs, potentially influencing demand for MongoDB's stock. After the initial pop the shares cooled down to $399.71, up 4.8% from previous close.
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What is the market telling us:
MongoDB's shares are very volatile and over the last year have had 31 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 previous big move we wrote about was 6 days ago, when the stock dropped 8.7% on the news that the company reported third quarter results with calculated billings (revenue + change in deferred revenue) falling below Wall Street's expectations. Customer count also missed, and growth of this key metric slowed. On the other hand, revenue exceeded expectations during the quarter.
Looking ahead, next quarter and full year revenue and non-GAAP operating income guidance came in higher than Wall Street's estimates. However, management guided for a seasonal impact on consumption growth in the Atlas segment (roughly 2/3 of overall revenue) around the holidays. Additionally, the projection of a sequential decline in non-Atlas revenues deviates from the typical Q4 uptick.
Overall, the quarter was mixed, and the commentary on near-term growth outlook may raise concerns among investors. Here is an example of a stock that is performing quite well on an absolute basis but given its high valuation multiple (a proxy for high expectations), must put up very impressive quarters with no warts to get the market excited and the stock up. Following the results, Monness, Crespi, Hardt analyst Brian White noted, "The tone of the call was less upbeat than past gatherings with MongoDB highlighting upside in Enterprise Advanced and inline cloud performance for Atlas."
MongoDB is up 110% since the beginning of the year, and at $399.71 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 $4,694.
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