Tuesday, after the close, MongoDB, Inc. (MDB), reported an impressive Q2 Beat n Raise:
We believe the stock has another $30-$60 of initial follow-through upside through Q3-end along with the potential for $100-150 of multi-quarter upside.
MDB has a fireside chat at Citi in the middle of next week and then an Investor Day on September 17th. So, two looming catalysts right there.
MDB traded its most volume ever today. Software capital will continue flowing into it, as CRWD is down $12 in AH too.
Additionally, SNOW is up $25 in the After Hours. This boosts its valuation to a 16x blended Price-to-Sales two-years out, here at current AH prices.
MDB trades for HALF of SNOW's valuation.
While SNOW's product line is growing in the low-30s, percentage-wise, MDB’ main revenue driver, MongoDB Atlas, accelerated from 26% to 29% Y/Y growth... so, not too far behind.
While SNOW will likely make new 52-week highs first, we think the rabid accumulation we saw today in MDB will continue aggressively in the coming days and weeks.
MDB is likely to re-rate as it is a next-gen database play, taking share from Oracle's legacy database biz. But investors are also viewing MDB as an AI winner, one that has a substantially de-risked 2-4 quarters ahead, where there is still discernible upside, relative to consensus.
At least, that is how we see it.
Albeit, we get it wrong at times and are often early. BUT when we are right, we are often VERY RIGHT and we think we are VERY RIGHT here on MDB.
MDB is one of the true disruptors for AI software. Their next-gen database is where a lot of important AI start-ups in the Bay Area have chosen to stack their burgeoning AI applications. From our viewpoint, this removes the competitive threat concerns that have been lassoed around the stock over the last few quarters.
These AI start-ups are close to scaling meaningfully with MongoDB. Importantly, however, they played NO role in MongoDB's Atlas growth rate in Q2, which accelerated from 26% to 29% growth sequentially.
Mongo's 300bp rate-of-growth sequential improvement to nearly 30% in its main growth driver, Atlas, should accelerate its growth further as these start-ups quickly ramp up activity with Mongo in the coming quarters.
What is most bullish, however, is that the inflection in Mongo's consumption model occurred from BIG ENTERPRISE in North America, which accelerated its consumption spend. This consumption growth was consistently strong, auguring well for the next 2-4 quarters...
As such, it is easy to see another $30-$60 of upside, in the next five weeks, as the huge valuation disconnect between SNOW and its own stock shrinks. We think MDB will stage a more powerful secondary-wave up on its first breakout day after earnings. We will see.
MDB traded a 10X volume inflection yesterday. The stock was up 30%.
When these metrics are achieved, the success rate for our process is very high.
From a pure price and volume perspective, MDB will trade its biggest week of upside volume EVER this week. Instead of trading 2M a day, it will trade 3-4M shares a day going forward. And, with only 81M in the float, the math is compelling:
Please Note: When MBD begins trending, it typically kicks off a powerful move over 2-6 weeks. History is on our side here.
From a purely algo perspective, as each day chips away at remaining upside resistance through a big gap from $324-$342 and then to 52-week highs at $370, MDB looks like 80% odds to have this follow up move.
MDB is a 9 conviction. If Software was performing better as a group, MDB would be a 10.
Still, MDB and SNOW are the two disruptors that will see the big money flows from here. But with SNOW so pricey compared to MDB, we plan to lean into MDB.
Remember, MDB is nearly half as cheap as SNOW while only growing a few hundred bps slower with its main growth-engine product line. Tack on the massive volume inflection on top of the fundamental inflection of accelerating revenues that produced such a sizable Bean n Raise, and MDB looks like the right horse to bet on…
We initially sized a position in the name after the open, and plan to add on flushes toward $290 today or in the coming days as well.
Stop Loss: We plan to use a decisive break of the 10-day EMA as our stop.
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Disclosure: We are long MDB stock and calls. We may change our positioning at a moment’s notice, without notifying you of any such moves.
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