This overlooked software company is ‘expanding its feature advantages over rivals’, says UBS

MongoDB Inc. MDB Shares,
surged on Friday after an analyst said investors continued to overlook the software company.

MongoDB’s stock has climbed 41% since the company’s earnings report on March 8, but is still down 20% on the year. Despite the stock’s post-earnings rally, UBS’s Karl Keirstead wrote that the current stock price did not adequately reflect the company’s traction and opportunities.

He upgraded the stock to buy from neutral in a Thursday night note to clients, while raising his price target to $450 from $345. MongoDB shares rose more than 6% in Friday afternoon trading.

Keirstead’s recent conversations with some of the database platform company’s customers and partners suggest the company has room to expand its total addressable market.

“One of the fundamental reasons we held back from making a more optimistic call for MongoDB stocks was the persistent customer view that MongoDB was ideal for niche, specialized, and less complex use cases,” he wrote. “During this round of reviews, the tone changed, with several customers citing their use of MongoDB for more complex use cases requiring ‘transactional consistency’.”

These more complicated use cases are “typically associated with relational databases, workloads traditionally attributed to Oracle ORCL,
or MicrosoftMSFT,
” he added.

Keirstead also got the impression from his recent conversations that MongoDB is “further separating itself from the long list of ‘next-gen’ database vendors, including AWS,” Inc.’s AMZN,
offer. MongoDB’s traction could help ease concerns about its marketplace being crowded.

More generally, he thinks investors appear to be confident in the data software industry, although sentiment has been “recently rattled” due to recent comments on usage trends from players such as Snowflake Inc. SNOW ,

“While MongoDB’s latest Q4/Jan print boosted Street’s confidence, in our view, the stock does not fully reflect the narrative that MongoDB is increasingly being used for more complex workloads and that ‘it expands its feature advantages over its rivals,’ he concluded.

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