How AI Implementation Could Help MongoDB Roar Back in 2025
MongoDB (NASDAQ: MDB) had a rough year in 2024, with shares down an excruciating 40% as of the Dec. 26 close. However, Wall Street analysts appear to see light at the end of the tunnel for this tech stock. Among 24 price targets released in December, their average indicates an upside in the stock of 35%. Below, I’ll break down Mongo’s product, developments that drove the stock down this year, and lay out why some are highly bullish on this name.
MongoDB: Intuitive and Scalable Database Management
MongoDB operates a database management software. The main differentiator of the software is that it uses a document-oriented data model. This differs from older database systems that use relational data models. They store information in tables. The best way to understand the utility of this is through an example.
An e-commerce company has a strong interest in storing and utilizing the data it has on its customers. They can use the information to give customers personalized product recommendations, potentially boosting sales. However, the data that a company has on each customer can vary widely. One customer might have just made an account and only have their name and birthday entered. Another customer might have made hundreds of purchases, signed up for the rewards program, and submitted a warranty claim.
In a relational model, one table would store personal information, and another would store purchase or warranty data. Aggregating all data about a single customer can be time-consuming and computationally expensive as complexity increases. Additionally, the company must predefine any possible data category it might accumulate. This makes the system rigid and requires system-wide modifications to the database schema that can be disruptive.
In contrast, MongoDB’s system stores all the information on one customer in a single document or profile. This document can store as little or as much information as the company has. Companies can add new categories as they need them for a single customer. This increases efficiency in maintaining the database and makes targeting individual customers easier.
The company’s main offerings are MongoDB Atlas and MongoDB Enterprise Advanced. They do the same things, but MongoDB manages the Atlas system for customers. The other option is for large enterprises. They manage the system themselves, allowing for greater customization. In 2023, the systems accounted for 66% and 26% of total revenue, respectively.
Bad Q1 Guidance Set MongoDB Up For a Tough Rest of the Year
The company’s share price has been crushed after many of its past earnings releases this year. The reaction after its fiscal 2025 Q1 results, reported in May, was particularly adverse. The company saw light consumption on Atlas, causing it to greatly lower its earnings guidance for the entire year. Atlas customers pay more the more they use the system. MongoDB refers to this as consumption, and it directly affects revenue.
MongoDB is trading 52% below its 52-week high that it reached in early February, as of the Dec. 26 close. Most of this has come due to an extreme contraction in its valuation multiple. The company’s forward price-to-earnings (P/E) multiple is down 56% from a peak of nearly 180x. However, it is still trading at an eye-watering 79x.
The Bull Case for a MongoDB Comeback in 2025
One thing that seems to have hurt Mongo in 2024 is businesses directing more spending towards investments in AI, instead of spending at Mongo. However, there has been much made of the lack of truly game-changing AI applications despite the extreme investment. This could start to turn around in 2025. Eventually, if the AI revolution is really going to materialize, AI-powered use cases will need to store and access massive amounts of data.
This is where MongoDB comes in. As AI becomes more widely used, the demand for database software to manage that information must increase. Thus, the transition from AI investment into the application of AI should help Mongo’s business. The company’s management continues to emphasize that its database is well-positioned to support AI workloads.
An important aspect of MongoDB’s long-term growth opportunity is that nearly every industry uses its service. This gives the company the ability to take advantage of the proliferation of AI applications across the entire economy. The total addressable market is thus massive if the belief is that AI will transform every part of the economy.
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