MongoDB (NASDAQ:MDB) is getting some positive commentary from Wall Street, as RBC Capital Markets started coverage on the database company, noting that the recent pull-back in shares provides a "unique opportunity."
Analyst Rishi Jaluria started coverage with an outperform rating and a $505 price target, implying some 28% upside, noting that shares now trade at 18 times estimated 2023 revenue. This is a discount to the implied 23 times for the price target, which is a "premium to peers that we view as deserving given MDB's durable leadership in next-gen databases, large and fast growing [total addressable market], and powerful secular tailwinds," Jaluria wrote in a note to clients.
Jaluria noted that MongoDB's core total addressable market is more than $25 billion and the company is "uniquely positioned" in the highest-growing areas, including NoSQL and cloud database-as-a-service.
"We acknowledge MDB's stated $100B+ TAM is more optimistic given it accounts for workloads unlikely to be fully addressed by MDB (data warehouse, relational database)," Jaluria wrote. "However, we see this as a moot point given MDB’s core market provides plenty of room for strong growth in the medium term."
MongoDB shares were lower in premarket trading, down 0.5% to $379.99.
In addition, Jaluria pointed out that the days of Oracle (NYSE:ORCL) completely dominating databases are gone and though incumbent databases have proven to be resilient, it's likely that next-generation databases will continue to gain share.
While MongoDB is the leader in independent NoSQL and is growing faster than its competitors at 50% growth with more than $900 million in annual recurring revenue, there are some long-term competitive risks, Jaluria explained.
These include NewSQL as an alternative, Oracle's "stickiness" in databases is still prevalent and hyperscalers could limit MongoDB's opportunities, all of which could "prevent MongoDB from becoming the next Salesforce."
In January, Macquarie said that MongoDB was among the stocks best positioned to take advantage of the digital transformation, as developers have more power than before.