MongoDB gets Buy at BofA, while Snowflake initiated with Neutral
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BofA started coverage on MongoDB (NASDAQ:MDB) with a Buy rating calling it the next-gen database leader for digital enterprise, and initiated Snowflake (NYSE:SNOW) with Neutral, noting that the company is a cloud leader in a slowing core market.
MongoDB (MDB): BofA initiated coverage on New York-based MongoDB with a Buy rating and a $450 price target, noting that the company is a best-of-breed next generation database vendor which is well-positioned in the rapidly growing NoSQL (not only SQL) unstructured database market, to capture share from market leaders such as Amazon (AMZN) (Dynamo DB) and Microsoft (MSFT) (MSSQL/Cosmos DB).
The analysts said that new products would maintain solid high 30s growth.
The weakening macro and consumption usage headwinds have prompted slowing revenue and cash flow growth in the last few quarters. However, new products announced in June should help MongoDB to sustain solid high 30s growth in the core Atlas cloud offering, with a path to acceleration in the next several quarters, the analysts noted.
The analysts talked to several system integrator partners in recent months, and feedback from them indicated very healthy pipeline builds for the new stream processing and vector search offerings to support deployment of new artificial intelligence, or AI, applications.
Snowflake (SNOW): The firm began coverage on the Bozeman, Mont.-based cloud data management platform provider with a Neutral rating and a $195 price target.
The analysts think that Snowflake is well positioned to capture more share of the $132B data management market due to its status as a first mover in the cloud; interoperability with the major public clouds; and a platform that is capable of running multiple workloads.
However, the company's pay-as-you-go/consumption pricing model is facing headwinds which, while improving, is still weighing on growth in Snowflake's core data warehouse business, the analysts noted.
Unique pricing model no cure for slowing revenue: The analysts said that the company's unique pricing structure provides a key competitive advantage, however, it also presents a higher degree of exposure to a still challenging IT spending environment.
Since customer consumption headwinds started in Q4 FY'22, product revenue growth has slowed down for seven consecutive quarters (from 102% Y/Y in Q4 FY'22 to 37% Y/Y in Q2 FY'24), the analysts added.
The analysts added that their analysis of website traffic data indicated 2% upside to Q3 FY'24 revenue, which is not likely to be a meaningful catalyst for the stock at its current valuation. The analysts would look for improving signals on this metric, which would likely to be a leading indicator for reaccelerating growth.
New products are important to increasing growth of sales: The analysts added that feedback from key system integrator partners suggested that Snowflake has a growing pipeline build for new workloads outside of the core data warehouse. These include the Snowpark development platform and the Unistore transactional database.
The analysts think that the contribution from these emerging workloads is key to getting growth moving again.
Snowflake (SNOW) has a Hold rating at Seeking Alpha's Quant Rating system, which consistently beats the market. Meanwhile, the Seeking Alpha authors' average rating is more positive with a Buy and so is the average Wall Street analysts' rating.

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