Tom Nash
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Why I Just Added This New Stock to My Top Stocks List.
🕑 Added 2025-01-15 19:19:32 +0000 UTCI just added MongoDB (NASDAQ:MDB) to my top stocks list.
Why? Let’s talk about what I’m seeing.
The stock is down 40% over the past 12 months, so the fundamentals must be bad right? Let's see:
+ 22% revenue growth
+ 220% free cash flow
2X cash vs. debt
73% gross margin
Sure its not perfect, and it has its problems and weak spots, like any other stock, but from a pure fundamental perspective, the stock looks quite strong, so maybe its the businesses side that is dragging it down?
MongoDB’s growth has been meh, for them. They came off 40%+ annual growth rates in past years, decelerating to “just” 20-something percent recently, and they’re guiding for around the mid to high teens in the next quarter or so. Do I hear the peanut gallery booing? Let’s keep it real: The entire world’s economy hasn’t exactly been singing showtunes. Many high-growth companies have reported slower consumption from customers who are pinching pennies.
And yet, despite all that, MongoDB is still landing new accounts, still doing 20%+ on a bad day, and still posting net expansion rates around 120%. In plain English, that means customers keep increasing their spending with MongoDB over time. Yes, the pace of that spending slowdown spooked the market. But a well-dressed slowdown at 20-something percent?
I’ve seen far uglier decelerations in my life, folks.
MongoDB is the undisputed heavyweight champion in the NoSQL database arena. They command somewhere around half of the entire NoSQL market. Yes, half. MongoDB has a big seat at the table.
MongoDB’s key revenue driver, Atlas, lives on a “consumption model” in the cloud. In a bull market, consumption based revenue is a pure joyride: Each new deployment ramps quickly, fueling top line acceleration. In a shaky macro, however, consumption models can get slammed if customers run smaller workloads or hold off on expansions.
That’s exactly what you’re seeing here, a bunch of new workloads from customers ramping more slowly.
But is that consumption doom forever? I doubt it. The second the macro picture perks up, those workloads revert to old habits. And guess who’s standing there, arms wide open, to collect that renewed usage? MongoDB.
Let’s tackle one of the most common misconceptions: “MongoDB doesn’t have direct AI exposure.” If you mean, “Do they have a product named MongoBrain or some ChatGPT clone?”—then yes, you won’t see them rolling that out.
But AI is all about dealing with huge volumes of data in complex structures. That’s the entire purpose of MongoDB.
Generative AI and advanced machine learning are forcing companies to re think their tech stacks. Why? Because building next gen AI features on top of 30 year old relational databases is about as brilliant as putting a Rolls Royce engine in your grandfather’s 1972 pickup.
It’s clunky, expensive, and breaks down every 10 minutes.
MongoDB has been hammering the message: If you want to modernize your massive stack of legacy apps, and in some regulated industries you really need to do that for survival, Mongo is your friend. They have a robust set of tools that help you migrate old SQL based stuff to their NoSQL-based platform significantly faster than ever before, partly thanks to AI assisted code rewriting and testing.
Having said all that, yes, MongoDB’s stock recently slid, rather dramatically. The immediate culprit? A 14% revenue growth projection for the next quarter. Yes, that’s a comedown from their old stratospheric days.
So let’s talk about the reality versus the hype.
Look, if MongoDB’s technology were suddenly obsolete, that’d be a concern. But it isn’t. In fact, the technology is still best in class, they’re winning new logos, net expansion is healthy, and they just posted a blowout quarter on profitability. The short term guidance is almost entirely due to weak consumption from smaller customers and lumpy multi year licensing deals.
For their Enterprise Advanced (EA) product, MongoDB has to follow certain accounting rules (ASC 606) that can cause wild swings in recognized revenue, depending on the quarter in which multi-year deals close. If a multi-year license lands all in one quarter, that quarter’s revenue pops abnormally high and the next quarter might look artificially low.
So don’t panic if you see quarter to quarter lumps. Zoom out.
MongoDB realized that focusing too heavily on mid market customers wasn’t the best idea when the macro environment slowed. Smaller customers reined in usage or paused expansions. The solution? “Go up market,” as they’ve described. Large enterprises have deeper pockets, more urgent modernization needs, and generally bigger appetite for rolling out AI-driven or data-intensive apps at scale.
They’re already seeing momentum with bigger accounts. The likes of Allianz, Cisco, and Financial Times, for example, are migrating hefty workloads. And guess what: those workloads have a far higher chance of turning into multi million dollar annual deals than your average 20 person startup.
This pivot won’t happen overnight, but once it does, usage ramps tend to be big and sticky.
Despite a slower consumption ramp, MongoDB still managed to add about 1,900 new customers in Q3 an improvement from the 1,400 additions. And that includes 125 new accounts above $100K in annual revenue.
So, ironically, the “bad news” quarter that triggered a sell off is actually filled with hints of a future uptrend.
Let’s talk numbers for a second because I know the question in your mind: “Tom, is this stock cheap enough to justify the risk?”.
Market Cap: Hovers around $20B (depending on the day you’re reading this).
Forward Revenue (FY26): Around $2.3B.
EV/Sales: Roughly 9-10x forward sales.
In the high growth tech universe, 9-10x forward sales is not crazy, especially for a category leader with a massive TAM ($150B+ by many estimates). This is a far cry from the nosebleed multiples that many cloud names commanded in 2021.
If MongoDB’s growth re accelerates into the 25% range, very plausible in a better macro environment or if more AI driven modernization projects go live, this multiple could look cheap in hindsight.
Most of you may not remembers but, they used to trade well above 12-16x forward revenue when they were in the 30%+ growth zone.
Having said that, there is risk here that you must be aware of.
If this macro lull deepens, or if mid market consumption remains weak for longer than expected, Mongo could keep delivering those 15-20% growth prints, which might not excite the market.
They’re trying to move up market more aggressively. That demands heavier sales investment, longer deal cycles, and specialized solutions. If they bungle that pivot, the growth re acceleration may not come.
So what's the bottom line here?
I added MongoDB to my top stocks list because I see a premium developer first platform in the cloud database market, one that has a gigantic runway left in modernizing legacy apps and tapping into the AI wave.
Is it the cheapest stock in the universe? Probably not.
But after the recent pullback, the valuation has reached a level where the risk/reward is significantly improved.
So, if you don’t mind waiting out a few volatile quarters while the market sorts its feelings, MongoDB could reward you handsomely. Just remember: Nothing’s guaranteed. If they can’t execute their pivot up market, the stock may languish for a bit.
Still, I’ve seen enough to believe this is an interesting enough company, to explore further.
—
P.S. I am just an opinionated guy on the internet. This article reflects personal views, not financial advice. As always, do your own due diligence.
Comments
Mircea
Reading this I had an epiphany on why PLTR's clientele is made up of government agencies, corporations, and other organizations, and why $MDB might need to move up in the market in order to diversify their revenue stream which is much needed in these times. Their Atlas Vector Search is their most relevant offering, in my opinion given this environment, which enables building intelligent applications powered by semantic search and generative AI using native, full-featured vector database capabilities. The question now is how they could partner up with other vendors and create a product that is greater than the sum of its parts, because the problems the world is facing are getting much larger and harder, SMBs will probably still prefer to roll up their own in-house solutions that assemble various managed services including $MDG offerings.
luckybaby
Thanks Tom. DCA strategy?
Kevin
I love this kind of text content
Fazal Lakhva
Thanks Tom , never knew it is NoSQL database
canonwhale
Thanks Tom!
Mikaelyn Austin
Thank you Tom!
