MongoDB: An AI Play That’s About To Boil Over

MongoDB NASDAQ: MDB emerged as an AI play when it released FQ1 earnings in early June. The company beat on the top and bottom lines and issued clear guidance saying it was well-positioned to benefit from the AI boom. Not only is it critical to the AI infrastructure, it is a cloud-based database and data-management system, but it is part and parcel of AI applications.

Its connectivity with Gitlab NASDAQ: GTLB, another emergent winner in the AI race, makes it a go-to network for developers building new AI and AI applications. The takeaway is that MongoDB’s growth and profitability have been accelerated, and the analysts are taking note. 

The Analysts Go Mongo Over MongoDB 

There are a few exciting details about the analysts' interest in MongoDB. The first is that the company has picked up 12 new analysts over the last few months, 1 since the Q1 release, doubling its coverage. That is important because it means more investors are becoming aware of this company positively, and many of them will follow the leader into the market. That alone supports the stock price, and the consensus sentiment is a firm Moderate Buy. 

The consensus price target is a small concern but mitigated by the trends. The consensus price target of $353.75 is about 10% below the current price action but is trending higher. The Q1 release sparked 16 new reports, including 15 upward price target revisions, 1 new coverage, and 1 reiterated coverage at Outperform.

The range of targets for this group is $240 to $445, their consensus is closer to $382, but even this is misleading. All but 1 of the 15 new price targets are within the range of $396 to $445, which has a midpoint that puts the market well into a complete reversal. 

MongoDB Expands Exposure To Cloud, AI Services 

MongoDB hosted a developer’s conference a few weeks after the Q1 release and made several announcements that will help drive revenue and earnings. The 1st is an expanded partnership with Google’s NASDAQ: GOOG cloud unit to help accelerate the development of generative AI models and applications. The 2nd is a suite of new developer features that include support for resources on Amazon’s NASDAQ: AMZN AWS platform. The 3rd is enhanced capability for businesses and industries seeking to migrate to the cloud or expand their cloud networks. 

The institutions may be a headwind to price action in the near term. The institutional activity has been bearish on balance for the last 12 months, with selling outpacing buying at a rate of 2:1. The activity picked up in the 1st half of 2023 as share prices began to rebound, and it may remain heavy for the next few months.

The stock price is up more than 175% since the bottom in 2022, and that offers a significant gain for money managers struggling to deliver results. 

MongoDB raised its guidance for Q2, and the analysts have followed suit with their targets. There have been 19 upward and no downward revisions for Q2 results which have performance pegged at the high end of guidance. This may be a high bar to beat, but it may also be cautious, given the momentum in the AI industry. Regardless, the company and the analysts expect growth to hold steady near 29% YOY> 

The Technical Outlook: MongoDB Is In Reversal 

Shares of MongoDB are in reversal following the Q1 results. The market is up more than 35% in the last month and trading at a new multi-year high. The indicators suggest an increasingly bullish market and the rally's possibility to continue. If the market follows this signal, shares could increase to $440 before hitting significant resistance.