MongoDB Earnings: Stellar Results Thanks to Enterprise Strength; Raising Fair Value Estimate to $403

No-moat MongoDB’s third-quarter results were stellar, coming in well above our estimates and FactSet consensus as enterprise revenue exceeded expectations, partially thanks to higher volumes in multiyear deals. In our view, momentum indicates just how strong demand is for MongoDB’s capabilities—from its core document-based database (which we believe excels because it is easy to use), or newer features like artificial intelligence-generated code. Such strength led the firm to raise its outlook for the year. Despite the excellent quarter, the market reacted poorly with shares dropping by about 6%. The mismatch was a result of several words of caution from management, who highlighted near-term headwinds that the firm is facing for long-term rewards. We have a strong conviction that such near-term investments and mix shifts will benefit the firm in the long run, enabling it to reap more value from the seedlings of strong switching costs we see throughout the business. As a result, we are increasing our fair value estimate for MongoDB to $403 per share from $379 per share. Shares traded near $409 per share after-hours and this leaves the stock within 3-star, fairly valued territory.