MongoDB, Domo Analyst Sees Durable Growth Trajectory, Attractive Valuation

Cloud-based database company MongoDB Inc MDB and business intelligence software provider Domo Inc DOMO are growth stocks that possess substantial upside potential, according to an analyst at Morgan Stanley.

The Analyst: Sanjit Singh upgraded MongoDB from Equal-weight to Overweight and increased the price target from $295 to $439.

The analyst also upgraded Domo from Equal-weight to Overweight and hiked the price target from $41 to $70.

Morgan Stanley On MongoDB's Growth Story: MongoDB has established itself as one of the most popular databases in the world over the past decade, supporting development of modern net-new applications, Singh said in a Thursday upgrade note.

The company's leading market position is evident by the over 100 million downloads of its open-source edition and 2 million accounts for the free edition of its public cloud database-as-a-service offering Atlas, the analyst said.

MongoDB is poised to experience a 30%-plus durable growth trajectory over the next several years helped by two factors, he said: a revenue mix-shift toward the strongly growing public cloud business and the maturation of its go-to market and sales model to scale a modern, cloud-first business.

"This trajectory would see MongoDB eclipsing the $1 billion revenue threshold potentially by FY23 at rate of growth of ~30%," Singh said.

MongoDB's fundamental growth story does not look overly demanding given the strategic nature of the asset and shares trading at a discount to high-growth SaaS peers, according to Morgan Stanley. 

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Why Domo's Business Has Reached Inflection Point: Domo has responded to the pandemic with a sense of urgency, taking critical actions to preserve the long-term health of the business, including a $35-million cost reduction in April, Singh said in the upgrade note.

Despite the actions, including sales capacity reduction, the company has meaningfully accelerated billings growth thus far in fiscal year 2021, the analyst said.

This is a signal the business has reached a key inflection point, he said. 

Consequently, the company has emerged as a standout in the over $20-billion business intelligence market, Singh said.

The analyst sees a more durable growth trajectory going forward following the company generating sustainable cash flow.

With shares trading at a discount to infrastructure and analytics peers, they represent an attractive opportunity at current prices, in Morgan Stanley's view. 

MDB, DOMO Price Action: At last check, MongoDB shares were advancing 9.29% to $368.30 and Domo shares were up 4.62% at $63.26. 

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