Canaccord raises MongoDB stock price target on AI growth potential

Canaccord upgraded MongoDB's stock price target to $480 from $400 on Tuesday, retaining a Buy rating. Analyst David Hynes highlighted MongoDB's role in AI-driven application development as the primary reason for the upgrade, noting the company now boasts two stable growth engines, up from one previously. MongoDB recorded a 122% net revenue retention rate and 48% of its customers spent $100,000 or more on two or more products, up from 42% a year ago.

The company's annual revenue climbed 24% to $2.6 billion, with a healthy gross profit margin of 72%. However, AI's contribution to revenue remains modest. An InvestingPro tip predicts MongoDB will be profitable this year, with 11 additional tips available to subscribers. The firm anticipates revised enterprise agreement growth expectations at MongoDB's upcoming investor event.

Canaccord considers MongoDB to be undervalued compared to peers like Datadog, trading at 11 times the estimated sales for calendar year 2027. Despite recent stronger-than-expected Q2 results, including $1.90 earnings per share and $771.8 million revenue, shares fell after hours due to concerns about near-term prospects. MongoDB raised its full-year guidance, emphasizing momentum in AI products such as vector search.

However, investors remained wary, with Morgan Stanley raising its price target to $430 from $380, while Guggenheim kept a Buy rating with a $560 target. Citizens analyst Patrick Walravens also upgraded MongoDB to Market Outperform with a $519 price target, citing better-than-expected guidance. MongoDB expects non-GAAP EPS of $1.57-$1.61 and operating income of $152.0M-$156.0M on $756M-$761M revenue for the upcoming quarter.