Analyst Note| Julie Bhusal Sharma |
No-moat MongoDB’s second quarter was a strong one—posting revenue well above our expectations and non-GAAP earnings per share higher than our forecasts. Guidance was more of a mixed story—as revenue expectations were boosted substantially, with the range of non-GAAP losses per share worsening. However, we think the less rosy EPS forecast is not concerning. We admire management’s ability to invest heavily now—given its current momentum—at the expense of poor public perception in the short term. By doing so, we think MongoDB will reap robust returns on invested capital with help from what we see as seeds of switching costs today. Marrying insights from this quarter and updates at MongoDB World in June, we are raising our fair value estimate to $360 per share from $344 per share. With after-hours shares trading near $278, down 14%, we view shares as attractive for investors wanting exposure to the mission-critical database management space via one of its long-term winners.