MongoDB’s Stock Faces Significant Challenges Amidst Fierce Competition

MongoDB (MDB) shares have fallen 54.1% over the past year, significantly lagging behind the Zacks Computer and Technology sector, the S&P 500 index, and the Zacks Internet – Software industry’s returns of 3.1%, 6.9%, and 10.4%, respectively. Faced with an uncertain macroeconomic environment and mounting competitive pressures, the company is navigating a difficult near-term landscape. Additionally, the stock has been impacted by broader market sell-offs driven by concerns of decreased consumer demand and trade tensions. Investors should closely examine the factors affecting MDB, as these developments present substantial warnings.

Intensifying Competition Poses Risks for MongoDB

MongoDB encounters stiff competition from major players, including Amazon’s (AMZN) DynamoDB, Couchbase (BASE), and Oracle (ORCL). Amazon DynamoDB is a rapid NoSQL database tailored for applications requiring high-speed reads and writes with real-time access. Oracle Database excels in indexing and query optimization, facilitating quick and efficient data retrieval. Couchbase proves effective in fast-paced, offline, and mobile-first environments, featuring built-in caching for expedient data access and using an SQL-like query language. Over the past year, shares of Oracle have increased by 10.1%, while Amazon and Couchbase recorded declines of 2.7% and 40%, respectively.

Competition within this landscape exerts pressure on MongoDB’s market share and growth prospects. As rivals improve their performance and integration capabilities, MDB’s position in the market appears to be under rising threat.

MongoDB, Inc. Price and Consensus

MongoDB, Inc. price-consensus-chart | MongoDB, Inc. Quote

Concerns Over Margins and Growth Trajectory

MongoDB’s operating margin is projected to decline from 15% in fiscal 2025 to 10% in fiscal 2026, indicating a deteriorating profitability trend. This drop largely stems from a $50 million high-margin multiyear license revenue that will not recur, coupled with increased expenditures on research and development (R&D) and marketing. Significant investments, including a $220 million acquisition of Voyage AI, are not expected to yield immediate returns.

The company’s gross margin has also eased from 77% to 75% in fiscal 2025, as its lower-margin cloud product, Atlas, now contributes 71% of total revenue. Despite its scale, Atlas’s growth remains flat year-over-year. Furthermore, revenue from the non-Atlas segment continues to decline, compounding growth challenges anticipated for fiscal 2026.

Disappointing Fiscal 2026 Revenue Guidance

For fiscal 2026, MongoDB forecasts revenues between $2.24 billion and $2.28 billion, reflecting a modest year-over-year growth of 12.4% at the midpoint. This growth outlook sharply contrasts with the 19% year-over-year growth reported in fiscal 2025. The Zacks Consensus Estimate for revenues stands at $2.26 billion, indicating a year-over-year increase of 12.88%.

The consensus for earnings has been revised downward by 2.2% over the past 30 days to $2.66 per share, suggesting an annual decline of 27.32%. Notably, MDB has surpassed the Zacks Consensus Estimate for earnings in the previous four quarters, with an average surprise of 62.04%.

Find the latest EPS estimates and surprises on Zacks earnings Calendar.

Conclusion: Consider Selling MongoDB Stock

In light of heightened competition, declining margins, and weaker revenue guidance compounded by broader market conditions, selling MongoDB stock may be a prudent course of action for investors at this time.

As non-Atlas revenues decrease, free cash flow has nearly halved, and operating margins remain under pressure, MongoDB faces multiple headwinds that challenge the rationale for holding the stock. With significant R&D expenses providing limited short-term returns and stagnant Atlas growth, the company’s outlook appears uncertain. Currently, MDB holds a Zacks Rank #4 (Sell), indicating that investors might be better off avoiding the stock for now.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Amazon.com, Inc. (AMZN): Free stock analysis report.

Oracle Corporation (ORCL): Free stock analysis report.

MongoDB, Inc. (MDB): Free stock analysis report.

Couchbase, Inc. (BASE): Free stock analysis report.

This article originally published on Zacks Investment Research (zacks.com).

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