Updated: Jul 10, 2019
June 26, 2919 - Updated
BotTrigger Trade Alert & Update: $MDB we have now been filled on our limit order to buy the November 15, 2019 $180 / $200 vertical call spread @ 5.00 (net filled @ $4.90). Discipline rewards: we were patient on NVDA, TSLA & now our MDB position has been filled (NVDA is now the source of our 3rd largest gainers in the portfolio).
On MDB we didn't FOMO and buy the post earnings surge up around the mid $180s. We laid out a solid case for why the pullback would inevitably come and in due time that pullback has indeed fleshed out. Very simply, MDB is renown (as or most stocks that uptrend) by following a very simple pattern that is almost requisite in stocks that "stair-step" higher which is that they almost always revisit their LAST PIVOT HIGH (circled in yellow highlight). We got that here today with MDB. Next we want to see a near -20% pullback on MDB which is the discounted value that usually commences the reversal zone where the stock starts to get reaccumulated. We're not quite there but close enough for this November call spread which expires in a little less than 5 months. MDB is now down about -18% from the highs. We can push a little lower but we're right @ a great support zone where we should expect the stock to start to catch a solid bid. PATIENCE WILL PAY OFF.
REMEMBER → STAY LONG BTC. We're likely to get a -30% range pullback @ some point, and that will be your Q to add into that pullback.
June 7, 2019 - Original Post
BotTrigger Trade Alert: $MDB MongoDB we're setting a GTC (good till cancelled) limit order to add the November $180 / $200 vertical call spread @ $4.00 for a 3% position.
MAX GAIN = $20 for a 400% gain opportunity so long as share price reaches @ $200 or greater than upon November 15, 2019 expiration.
Right now that spread is going for around $7.15 - $7.50. But the technical setup on MDB is consistently playing ball with the usual pattern of breaking out from extended bases (good) and then retesting that breakout & tagging the previous pivot high / breakout zone (good). It stair-steps higher beautifully. The pullback cycles when it tags the last pivot high usually sees around a -20% pullback from peak to trough. We want to be there catching the ball once we get that next -20% range pullback. If we can get filled @ $4.00 then the MAX GAIN on this trade would yield a 400% opportunity so long as share price reaches @ $200 or greater than UPON November 15, 2019 expiration. Right now the stock is in clear breakout mode with the stock up 15% today alone on an earnings beat. Revenue rose 78% in the quarter, which is substantially above the company's multi-year revenue growth trend. Total customers were up more than 100% in the quarter. They've signed up some of the biggest names on the Fortune 1000 list already. Here is a short list of clients they currently have contracts with to scale their databases: Coinbase, Google, Ebay, Cisco, Verizon, Medtronic, Adobe, UPS, Intuit, ShutterFly, Entertainment Arts, Verizon, KPMG, Sega, Nokia, GAP, and the list goes on https://www.mongodb.com/who-uses-mongodb
So what is MondoDB?
The story at MongoDB is pretty easy to understand, and it is one that lends itself to tremendous long term growth potential.
At the heart of every software application is a database. That database is used to store, organize, and process data. Traditionally, these databases were relational, meaning they were row-based. That’s because traditional data was almost always structured in a row-column manner.
But, modern data isn’t always structured as such. In fact, because we can now generate data through various channels, modern data is increasingly document-based and much more free-flowing. Enterprises need to store, organize, and process this document-based data, too. But, relational databases can’t do that efficiently. As such, there’s been a boom in the adoption of non-relational databases to handle this new data form.
MongoDB is one of these non-relational databases, but it’s different in one important way: It’s a hybrid database that combines the best aspects of non-relational and relational databases so that enterprises can handle all data formats.
This solution has been a huge hit. MongoDB has consistently grown revenues and customers at a 50%-plus rate over the past several years, with growth actually accelerating over the past several quarters thanks to more and more businesses understanding the benefit of a hybrid database solution.
The potential here is that MongoDB has just 14,200 customers. There are nearly 6 million employer businesses in the U.S. alone. Further, the company projects to do just $380 million in sales this year. The global software database market is closing in on $60 billion.
Broadly, then, MongoDB is a hyper-growth tech company, with a winning solution, that is rapidly gaining share in a big market, and which has a very long runway for future growth. That is a winning combination for MDB stock.
The Growth Boxes Are Checked Off
When it comes to long term winners like MDB, you want to buy them on weakness so long as all the growth boxes are checked off. Those growth boxes include:
1) still healthy revenue growth,
2) stable margins,
3) reasonable valuation
4) favorable backdrop
The Q1 report confirmed that MongoDB stock does check off all those boxes.
Revenue rose 78% in the quarter, which is substantially above the company’s multi-year revenue growth trend. Revenue growth is projected to remain very big for the foreseeable future, too. Customer growth trends likewise remain healthy. Total customers were up more than 100% in the quarter.
Gross margins are taking a step back. But, that’s because of some new business integration issues which will pass by the end of the year. Meanwhile, operating margins are substantially improving as robust revenue growth is driving equally robust opex leverage.
The valuation is rich. But, assuming this company can grow revenues at a 20%-plus rate over the next decade, maintain 70% gross margins, and drive the opex rate down to 30%, MongoDB could easily be looking at $10-plus in EPS by 2030. A big growth average 30-forward multiple on that implies a 2029 price target for MDB stock of $300 or more. So, long term upside remains compelling.
Lastly, the backdrop is still favorable. This company has minimal trade exposure because it’s a services business. An economic slowdown does pose a threat, but the secular pivot towards hybrid databases is likely strong enough to offset such weakness. Meanwhile, new data is increasingly not in a row-column format. Companies are also increasingly adopting data-driven growth strategies. Thus, the need for an enterprise to adopt hybrid databases is only growing.
All in all, the current trends here remain favorable.
Bottom Line on MDB Stock
MDB stock is a long term winner that continues to be supported by favorable growth trends. So long as that remains true and the valuation remains reasonable in the big picture then MDB should remain on a medium to long term uptrend. Against the backdrop of that medium to long term uptrend, near term weakness is a buying opportunity.