New Trade for April 27th, 2021

Stocks were steady in early trading on this monster day of earnings UPS, Tesla, Raytheon, Google and Microsoft all report after the closing bell today.

The two day FOMC meeting begins today.  While no major policy changes are expected, investors will be paying close attention as Chairman Jerome Powell will likely face questions around potential withdrawal of monetary easing.  Most analysts expect him to say such talk is premature, 

Today’s trade alert highlights a tech firm, whose share price was dragged down in the recent pullback and hasn’t quite recovered. 

Cloud database provider MongoDB’s (MDB) stock was caught up in the tech pullback.  Even a solid earnings report and an analyst upgrade didn’t prevent the stock’s downward slide.  MDB share price iis still down around 23% from its February high.   For long-term-minded investors, this presents an opportunity to buy MDB at a discount.

In February, Google Cloud and MDB entered an expanded five-year partnership to offer  deeper integration of Google Cloud products with MDB‘s global cloud database, MongoDB Atlas. The partnership is driving greater customer engagement and enhancing MDB’s customer experience because it offers a “pay as you go” service on the Google Cloud Marketplace. MDB also recently teamed up with Tencent Cloud to allow its customers to  adopt and use MongoDB-as-a-Service across Tencent’s global cloud infrastructure.

Earlier in March, management reported its Q4 results with $171 million in top-line revenue growing at a 38% year-over-year clip. MDB’s Atlas is continuing to be the workhorse in its stable with a 66% year-over-year revenue gain to become almost half of the company’s overall business.  Even more impressive is that Atlas customer count grew a whopping 51% over the previous Q4 and it’s up sequentially 10% from last quarter.

Atlas customers tend to be smaller with an average of $6,000 to $7,000 in annual spend.  Often, these are developers testing out the features and functionality with a non-mission-critical application before choosing the product to power an enterprise-wide application. This has been a successful land-and-expand model for the company.  With consistent net expansion rates of 120%-plus, investors can see why customers who spend over $100,000 annually have grown to 975, up 30% over the last year.

As companies move their information technology applications to the cloud, this developer-loved platform could be the leading choice to power enterprises of tomorrow.  In addition, new cloud applications are being developed every day, giving this cloud database plenty of room to run.  It seems the long-term thesis for this tech stock is still intact and the only thing that’s changed for investors is the price of the stock. 

Analysts are bullish on MDB, establishing an average price target of $379.06. If MDB were to reach this price, it would have popped by more than 26%. The highest analyst target price for MDB is $500, while the low is $300. Of the 16 analysts who have studied the stock, six consider it a Strong Buy, six consider it a Buy, and five consider it a Hold and only one analyst rates the stocks as Underweight, which is the equivalent of a Sell rating.  

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