What Happened:
Shares of database software company MongoDB (MDB) fell 8.4% in the afternoon session after stocks declined, with investors likely taking profits. The Nasdaq fell 1.6%, while the S&P 500 was down 0.9%. Some of the big tech names felt the heat, with Tesla, Netflix, and Microsoft all declining by more than 2%. Notably, iPhone manufacturer Apple was also down nearly 3% following a research report by Counterpoint that suggested a decline in iPhone sales in China in the first six weeks of the year. The weak demand report could signal that the purchasing power of consumers in the region is weakening. Otherwise, we have found no other fundamental or rate-related reasons explaining the broad market decline.
It is a week packed with information for investors to digest. Fed Chair Jerome Powell will give updates to Congress on March 6th and 7th, 2024, about the current monetary outlook, recent policy actions, and progress toward bringing inflation back down. Finally, on March 8th, the Bureau of Labor Statistics will report nonfarm payrolls for the month of February. The insight gleaned from the economic data and updates during the week could inform the market's outlook on equities and other assets for better or worse. Investors expect the Fed to begin cutting rates this year, with the expectation of the first rate cut as early as the first half of the year.
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.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. 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 24 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 25 days ago, when the company gained 6.3% on the news that the Bureau of Labor Statistics provided a revised inflation reading for December 2023, which came in lower than expected (+0.2% m/m versus the prior reading of +0.3%). This further supports the narrative that inflation is cooling, likely giving the Fed more reasons to start cutting rates in 2024. Also, stocks continued to rally as the Nasdaq rose 1.2% and the S&P 500 gained 0.57% to end another strong week of earnings with positive results from most of the big tech stocks that reported so far this season.
Notably, Meta reported strong top and bottom-line beats, hinting at a potential rebound for the advertising sector in 2024. Cloudflare also reported solid earnings with guidance for sustained growth momentum in 2024, further boosting the market's optimism toward software stocks, especially those with cloud and AI capabilities. Overall, it was also a strong week for equities, with the S&P 500 breaking past the 5,000 level for the first time as the market continued to maintain the strong momentum from the last quarter of 2023.
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.
MongoDB is up 5.7% since the beginning of the year, but at $405.49 per share it is still trading 19% 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 $4,014.
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