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The Ratings Game: This overlooked software company is ‘widening its feature advantages over its rivals,’ UBS says

Shares of MongoDB Inc.

were surging Friday after an analyst said that investors continue to overlook the software company.

MongoDB’s stock has climbed 41% since the company’s March 8 earnings report, but it’s still off 20% on the year. Despite the stock’s post-earnings rally, UBS’s Karl Keirstead wrote that the current share price doesn’t adequately reflect the company’s traction and opportunity.

He upgraded the shares to buy from neutral in a late Thursday note to clients, while boosting his price target to $450 from $345. MongoDB shares were up more than 6% in Friday afternoon trading.

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

“One fundamental reason we’ve held back from making a more bullish call on MongoDB shares was the persistent view from customers that MongoDB was great for niche, specialized and less complex use cases,” he wrote. “In this round of checks, the tone shifted, 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 assigned to Oracle

or Microsoft
” he added.

Keirstead also got the sense from his recent conversations that MongoDB is “further separating itself from the long list of ‘next-gen’ database providers, including AWS,” Inc.’s

offering. MongoDB’s traction could help assuage concerns about the crowdedness of its market.

More broadly, he thinks that investors seem to be confident in the data-software industry, though sentiment has been “recently dented” due to recent comments about usage trends from players such as Snowflake Inc.

“While MongoDB’s latest 4Q/Jan print boosted Street 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 is widening its feature advantages over its rivals,” he concluded.

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