MongoDB (MDB) stock price has bounced back after bottoming at $214 in June this year. It rallied to a high of $344, and is hovering at its highest point since May 28 as focus shifts to the upcoming earnings.
MongoDB earnings ahead
MongoDB is one of America’s biggest companies in the software and data industries. Its core product is its modern general-purpose database, which has numerous features like search, vector search, time series, data lifecycle, and application-driven analytics.
MongoDB uses a software-as-a-service (SaaS) approach, where it charges its customers a low price per month. It also uses a freemium approach, where it offers its services for free.
The serverless package costs $0.10 per million reads, while its dedicated package starts at about $57 a month. MongoDB is used by some of the leading companies globally like Toyota. Cisco, Okta, and Novo Nordisk.
MongoDB’s business has been doing well in the past few years. Its annual revenue has jumped from over $421 million in 2019 to over $1.68 billion last year. It has made over $1.81 billion in the trailing twelve months (TTM).
The next key catalyst for the MongoDB stock price will be its quarterly earnings, which will come out on Monday.
The most recent results showed that MongoDB’s business did well in the last quarter as its revenue rose by 13% to $478 million. Most of this revenue – $468 million – was in subscriptions, while the rest was services-related. MongoDB had a gross profit of $349 million, while its net loss rose to $71 million.
Analysts expect that MongoDB’s revenue will be $495 million, a 14.5% increase from the same period last year. The highest estimate is $512 million, while the lowest estimate is $471 million.
The average earnings per share estimate is 69 cents, a drop from the 96 cents it made last year. For the year, MongoDB’s revenue will come in at $1.93 billion, a 14% annual increase. It will then make over $2.2 billion next year.
A key concern about MongoDB is that its business is fairly overvalued for a company that is still making losses.
It has a market cap of over $25 billion and has a forward P/E ratio of 139, which is much higher than other companies.
A good way to value a company like MongoDB is to use the rule of 40, which weighs its growth and margins. MDB has a net income margin of minus 12% and a revenue growth metric of about 20%.
That gives it a rule-of-40 metric of about 8, meaning that it is substantially overvalued. As a result, it will need to continue to publish strong numbers.
MongoDB stock price analysis
The daily chart shows that the MDB share price bottomed and formed a double-bottom pattern at $213 in June and August. A double-bottom is one of the most popular bullish reversal patterns.
The stock has formed an ascending channel and is now a few points below its upper side. It has moved between the 38.2% and 50% Fibonacci Retracement levels.
Most importantly, the stock is about to form a golden cross pattern, when the 50-day and 200-day moving averages cross each other. A golden cross often leads to more gains in the longer term.
Therefore, the outlook for the stock is neutral for now. A break above the key resistance level at $350 will point to more gains, potentially to $400. The alternative scenario is where it drops to $320.
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