MongoDB’s Legacy Offering Surprises; Shares Attractive as Macro Risk Contained to Low-End Market

No-moat MongoDB started its fiscal 2023 with few query worries. Year-over-year revenue growth topped our estimate by a whopping 10-plus percentage points, leading to positive non-GAAP earnings per share despite our negative expectations. Behind the beat was MongoDB's Enterprise Advanced offering surprising management by growing sequentially, instead of declining, as customers migrate to MongoDB's Atlas cloud database. Nonetheless, we are not alarmed by the outperformance of MongoDB's legacy product, as Atlas growth remained robust. Additionally, we believe there will be virtually zero churn when Enterprise Advanced customers eventually migrate to Atlas. With earnings, management stressed that macroeconomic risk is mainly limited to lower-end self-service and midmarket customers growing revenue per account at a slower pace. We agree with this statement, as we believe that data management software is extremely sticky—especially for large enterprises—and even for smaller businesses, risk typically does not lie in existing workloads going away unless a company goes out of business. As a result, we maintain our $344 per share fair value estimate. With after-hours shares trading near $256, up 6%, we view shares as attractive for long-term investors.