The last few months have seen growth stocks across verticals significantly underperform the broader markets. Companies part of the SaaS (software-as-s-a-service) sector, such as MongoDB (NASDAQ: MDB), have been among the worst hit in 2022 as investors are worried about steep valuations, in addition to a range of macro-economic factors. 

Shares of MongoDB are down 48% in 2022, and the stock is trading 58% below all-time highs. So let’s see if MDB stock is a buy right now, given its depressed valuation. 

MongoDB is a cloud-software company. Its customers include the likes of Boots UK, Forbes, Keller Williams, Travelers, Verizon (NYSE: VZ), Vodafone (NASDAQ: VOD), and Wells Fargo (NYSE: WFC). Its services include MongoDB Enterprise Advanced, a commercial database server that customers can run on a cloud, on-premise, and in a hybrid environment. 

There is also MongoDB Atlas: a multi-cloud database-as-a-service solution that allows customers to access all the functionalities required by developers to get started with MongoDB. Further, the company also offers consulting and training-related services.

 

MongoDB beat earnings estimates 

MongoDB delivered a surprising performance in the first quarter of the fiscal year 2023, ending April 30. The SaaS company surprised investors in terms of profitability. Despite market uncertainties, revenue increased to $285.4 million, up 57% year-over-year. 

The top-line growth was attributed to its cloud data platform Atlas as sales grew by 82% for this business. Its gross profit rose to 75% compared to 72% in Q3 of fiscal 2022. Adjusted operating income for the quarter rose 6x to $17.5 million. MongoDB’s adjusted net income also improved to $15.2 million or $0.20 per share against the net loss of $3.9 million or $0.06 per share reported a year ago.

 

MongoDB is growing through partnerships

One of the fastest and easiest methods of growing fast is partnering with the industryU+02019s top players instead of competing with them. So MongoDB has partnered with giants like Amazon (NASDAQ: AMZN) and Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL)to hit its expansion goals.

In March, MongoDB and Amazon agreed to work together towards helping other organizations transfer their databases into the cloud. Further, the companies have also decided to integrate their sales, marketing, and developer training efforts.

In April, MongoDB had launched a service on Alphabet’s platform. It’s based on a pay-as-you-go subscription model and would let developers build and scale their applications with its Atlas platform on GoogleU+02019s cloud infrastructure quickly and cost-effectively.

These partnerships have been one of the driving forces toward profitability that have helped the company cut down on unnecessary research and development expenses.

 

MDB stock has great prospects

The cloud-based service industry has just started growing. MongoDB’s offerings are really attractive, and therefore the company has the potential to become one of the top industry players in the coming years. Its offerings like Atlas Serverless, Relational Migrator tool, or Queryable Encryption are powerful tools. They can drive the company’s progress by helping customers accelerate the production of new applications at a reduced cost.

MongoDB closed on June 10 at $254. The average analyst price target for the stock is $385.38. That’s a potential upside of almost 50%, making MDB stock a top contrarian bet right now. 

If MongoDB can continue to expand its customer base, its growth prospects will continue to improve. Therefore, looking at the current price at which the stock is trading and the potential return it can offer its investors in the future, the MongoDB stocks appear to be a great buy.

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