The Analyst
KeyBanc's Brent Bracelin initiated Mongodb MDB at Overweight with a price target of $50.
The Thesis
Mongodb has a chance to become a multi-billion-dollar database franchise as it's in a good position to benefit from an increase in cloud spending, Bracelin said in a note. He expects cloud spending to increase from $97 billion in 2017 to $314 billion in 2020.
The company also has a great opportunity in the replacement of traditional relational databases, which make over 90 percent of spending in the database market. Bracelin expects the $45 billion market could grow to $60 billion in 2020.
Revenue could quadruple to $705 million in the next five years, according to Bracelin. His bull-case scenario assumes that revenue could reach $1 billion in five years, with CAGR of 45 percent.
The company is trying to increase its customer footprint, which Bracelin said results in high operating losses. He expects the company to burn a half of its $279 million cash reserve before it reaches a positive free cash flow.
The Price Action
The stock traded up 1.4 percent Monday to $43.81 at time of publication. Shares gained over 80 percent since December lows.
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