On Monday, Guggenheim upgraded MongoDB (NASDAQ:MDB) shares from Neutral to Buy, setting a price target of $300. The new price target suggests approximately a 22% upside from the current level, based on a discounted cash flow (DCF) analysis.
This valuation corresponds to 10.1 times the enterprise value to next twelve months (EV/NTM) recurring revenue and 9.3 times the EV to fiscal year 2026 (FY26) total revenue.
MongoDB's stock performance has been lackluster recently, with a 30% drop since the earnings report released on December 9, 2024, compared to the 6% decline of the IGV software index. The market has expressed concerns about the deceleration of Atlas (NYSE:ATCO) consumption, potential growth headwinds from non-Atlas products, and the departure of a key CFO/COO. However, Guggenheim believes these worries are exaggerated.
According to Guggenheim's assessment, Atlas consumption trends have remained stable, and there was a modest acceleration in new annual recurring revenue (ARR) in the third quarter compared to the second quarter, when looking at a two-year stack. Recent channel checks also indicate that fourth-quarter consumption has picked up pace compared to the third quarter. Guggenheim forecasts Atlas growth to accelerate to 29% in FY26, a slight increase from 27% in FY25.
The firm also supports MongoDB's strategic investments in Enterprise Advanced (EA) and its "run anywhere" strategy. These investments aim to cater to the demand for running core business applications and new artificial intelligence workloads in hybrid environments. Guggenheim predicts these moves will result in sustainable low teens growth for EA and better market penetration for MongoDB.
Guggenheim anticipates that MongoDB's total revenue guidance for FY26 will likely mirror the conservative 15% growth rate set in the past two years. In a plausible revenue scenario, Guggenheim sees MongoDB growing at 24%, potentially performing better than FY24 rather than FY25.
"In other words, we're not assuming MongoDB soars like an eagle again, but rather gracefully maneuvers the future while giving investors balanced growth AND expanding margin," the firm said.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.