MongoDB Sees Strong Close to Fiscal 2022, but Difficult Path Ahead

No-moat MongoDB’s MDB fourth quarter was impressive amid ongoing macroeconomic headwinds, with revenue and non-GAAP earnings per share both above our expectations. However, guidance for the first quarter and full year was significantly below our previous forecasts as a result of its cloud platform, Atlas, being materially affected by a difficult macroeconomic environment.

Given the disappointing top-line outlook, we have tempered our growth expectations for MongoDB and are lowering our fair value estimate to $335 per share from $360, even with rolling our model forward. With after-hours shares trading at $206, down around 10%, we view shares as undervalued. Despite our lowered growth expectations, we still maintain our long-term thesis that MongoDB is partially insulated from macroeconomic uncertainty due to its mission-critical product resulting in very little churn. Additionally, we view the market as undervaluing the size of the database management market and believe MongoDB still has a significant growth runway.

Fourth-quarter revenue increased 36% year over year, to $361 million, as the customer count grew by over 1,700 sequentially to over 40,800. The growth was driven by Atlas, which had over 39,300 customers at the end of the quarter, up from 31,500 a year ago. On a revenue basis, Atlas grew 50% year over year, representing 65% of total revenue. Fourth-quarter gross margin was 75%, up by 370 basis points from the prior-year period, representing a higher mix shift toward Atlas. Although consumption trends are slowing, management noted that there has not been any uptick in churn, highlighting the mission-criticality of MongoDB, particularly Atlas. As growth slows down, management noted it will slow head count growth in the fiscal year and expect single-digit growth, down from 30% growth in fiscal 2023. We are encouraged by management’s emphasis that it will continue to invest in the business, even if it means at a slower pace.