MDB

MongoDB

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-$253.29 -55.24%
Conor's avatar
$20.7m follower assets
My $MDB trades
Following the Brian and Brian portfolio with my Robinhood account. Just subtract $GOOS and Bitcoin
Brian Stoffel's avatar
$64.7m follower assets
Purchase #20: MongoDB
This week was my turn to pick the stock that @brianferoldi and I are buying. I chose $MDB. Here's why...

The company's Atlas database-as-a-service is the backbone for organizing, searching, and keeping track of unstructured data in the modern age.

While usage has tamped down a bit recently, that has more to do with $MDB's customers than it does MDB's underlying business. NARR was still above 120%

No, the company does NOT produce free cash flow. But we believe (next slide) there's a wide moat to justify this spending

While the founder sits on the board of directors Dev Ittycheria has great reviews from employees

Atlas dominates revenue. The optionality we see is in additional use cases and tools for Atlas

So that's why we're buying.

We know it's still a righly valued company that has yet to turn a profit. What do you think?
In 10 years, buying MDB now will be an example of
6%Folly:too expensive w/o profit
33%Brilliance: Wide moat winner
60%Somewhere in between
45 VotesPoll ended on: 09/27/22
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Recent Trades
Some updates on a few positions I added to recently.

$MDB - Lots of chatter about slowing Atlas growth but this isn't really a concern of mine. MongoDB is still the leading NoSQL database - that hasn't changed. Database-as-a-service is an interesting model that (I believe) will continue to gain popularity as more and more applications move to the cloud.

$SNOW - The more I research and learn about this company, the more I love it. And the beauty of the consumption model with a data analytics provider is that customer spend can quickly balloon as more users are brought on and realize the power of the platform. Despite the high price tag, I'm continuing to add.

$CRWD - Endpoint security is a mission-critical expenditure, even in this type of environment. Zscaler results also seem to indicate companies are not cutting spending on cybersecurity. Crowdstrike continues to execute and the growing adoption of new modules suggests that customers see the immense value its products provide. This is quickly becoming a top conviction company.

After $ZS report, I will probably end up adding to that as well, but cash position is starting to dwindle a bit as I dip into it to fund some house projects.

$CRWD, $SNOW and $TTD (no adding because position is already fairly large) are my three highest conviction holdings at this point. All of these companies are proving that they are capable of navigating difficult economic positions. No surprise that they have grown to be my largest positions.
My $MDB trades
Following MongoDB's Q2 report, I decided to reduce my position in MDB and move the proceeds into SNOW. While I am still confident in MongoDB's long term opportunity in the database market, they are facing some headwinds for the remainder of this year that are impacting the rate of growth and their ability to demonstrate near term profitability. I provided a full write-up on my blog, but here are few of the take-aways from the quarter that guided my decision:

  • Revenue growth will decelerate in the second half of this year due to Atlas utilization stalling in a few digital native customers (crypto exchanges, gaming, e-commerce) and enterprise customers in Europe. The mix shift of revenue from their EA licensing to Atlas is magnifying the effect.
  • Profitability measures reversed in the quarter, going from positive to negative operating and FCF margin. These were driven by the resumption of in-person events (MongoDB World) and travel. Additionally, the company doubled the number of incremental new sales hires in Q2, which I think is bullish, but will drag on expenses for the remainder of the year.
  • On the positive side, MongoDB grew Direct Sales customers by the largest sequential amount ever in Q2. Direct Sales customers represent those customers with a salesperson assigned, versus self-service web site sign-ups. This large customer cohort generates 86% of MongoDB revenue.
  • Relationships with the hyperscalers are the strongest they have been in several years, particularly with AWS. These co-sell arrangements should also drive growth of Atlas.
  • Product announcements from the MongoDB World conference are generating strong customer interest. The Relational Migrator early access program is already oversubscribed, which allows enterprise customers to more easily migrate workloads to MongoDB. They also announced several new customer wins associated with time series, analytics and search.

While the stock will be pressured for the remainder of 2022, I think this will provide a favorable set-up for 2023, as we lap Q2 of next year. When affected customers begin expanding their businesses at normal rates, these additional growth will be on top of MongoDB's normal land/expand motion, magnifying the sequential grow in 2023. With easy comps in Q3-Q4 of 2022, the annual growth rates will look very favorable again. Also, the full effect of the spike in salesperson new hires will hit by Q2 of 2023, providing another tailwind. This should drive up the number of Direct Sales and $100k ARR customers going into the new year. Expansion of large customer spend should allow the improvements to operating leverage to resume.

With all that said, the execution risk is higher than before. Given SNOW's strong quarter, I decided to shift the proceeds into Snowflake. The two stocks are down the same amount YTD, so I felt like that is an even trade-off for my portfolio.
September portfolio
Sharing the portfolio like the rest of the group, so far so good, I'm happy with the lessons I learned during this prolonged bear market for growth stocks that essentially started in February 2021, basically right after I entered individual stock picking in November 2020. Lots of lessons I got. Really liking the way my allocations are and portfolio holdings. I'll continue to do smaller tweaks but much of the portfolio is set.

I'll use this post also as an opportunity to post on $MDB. After a horrible stock price reaction, I finally got the opportunity and digested their results entirely. EU weakness comes as no surprise given the economic situation here. NA performance stronger than expected is a bullish sign. Overall just facing tough comps and little tougher macro given the consumption based nature of Atlas.

Slower growth therefore to be expected in the upcoming quarters given the comments of lighter usage expected to remain for the rest of the year but all and all thesis on track for me.

After making sure I'm not adding to a potentially thesis breaking company, I added to my $MDB position, expanding it by roughly 20%.
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Hopefully you’re adding to those hyper growth companies while they’re down 30%-70% YTD. If I believed in them (haven’t done the research to have conviction either way, so I’m neutral) I’d be adding as much as I could. $NOW , $SHOP , and $SNOW are three of the strongest I’m looking at adding at these more rational valuations.
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Portfolio Update: August
With many holdings reporting earnings last month, I began to see some separation between the truly elite companies and the mediocre (or poor). Companies like The Trade Desk $TTD proved that they are an exceptional ad-tech company while many like $ROKU and $SNAP sunk. On the other hand, previous favorites $OLO and $MDB demonstrated that they aren't as resistant to macro forces as I thought.

$TTD is one of my personal largest holdings, so we're in agreement there. Surely over the long term $MDB, as a critical software and with the NoSQL trend, has staying power, no?
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Performance 9/1/22
Down -3.24% for the day

$MDB brought down saas and $NVDA $AMD chip Brought down semi stocks

Also reorganized my growth portfolio into two sections

Compounders:

Hyper-growth:
I haven’t gone over the earning reports which I’ll do over the weekend. My instinct is to wait and see, cause $SNOW being up 20+ percent is as insane as $MDB being down 20+ percent. The volatility isn’t a great indicator. As for cybersecurity companies $CRWD $ZS $NET $S are all eating into each other business and I’m really not sure which comes on top so I’m probably build starter positions in all of them and spend more time researching.
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Performance 9/1/22
Down -3.24% for the day

$MDB brought down high growth saas
And the ban on export chips on a$NVDA $AMD brought down semiconductors.

Semiconductors and high growth saas are two of my biggest bets so I’m definitely looking to buy more at these prices.
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Sachiv's avatar
$866.5k follower assets
Will $MDB follow $SNOW $DDOG & $CRWD in enterprise spending growth and resilience as they report and (hopefully) guide later today?
Will $mdb post resilient earnings and guidance?
66%Yes
33%No
9 VotesPoll ended on: 09/01/22
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