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MongoDB and Snowflake Receive Upgrades

Key Points

  • A positive sentiment towards risk is returning, which is expected to benefit tech stocks. 
  • MongoDB is performing better of the two and might reach new highs this year. 
  • Snowflake has more ground to cover but offers a more favorable risk/reward profile.
  • 5 stocks we like better than Amazon.com

After a challenging end to the summer for equities overall, with the S&P 500 index falling over 10% at one point, it appears that good times might be ahead for stocks. When it appeared that all the hard-earned gains from the past year could be lost, new data indicated a decrease in inflation. 

The same inflation that had a negative impact on tech stocks for most of 2022, as the higher interest rates used to combat it raised borrowing costs and dimmed profit outlooks. Therefore, signs that the worst might be behind us, indicating that the Federal Reserve might be nearing the end of its tightening cycle, led investors to reinvest in stocks

The S&P 500 recently experienced its longest winning streak in two years, and analysts are starting to show excitement. In particular, here are the most recent upgrades to two stocks in the data tech sector.

MongoDB Inc.

MongoDB Inc. NASDAQ: MDB experienced a rally of 225% last year through July. It seemed like MongoDB shares were well on their way to reaching the highs of 2021. However, a 30% decline by the end of last month did not paint a pleasant picture, but it now appears that this could have created a good buying opportunity. 

Earlier this week, the Capital One team upgraded MongoDB to a bullish Overweight rating, after previously rating it as equal-weight. The team recognized that while the overall environment remains challenging, the company’s outlook is optimistic enough to drive a recovery rally in its shares. 

The cautious yet optimistic sentiment echoed the sentiment from Bank of America, who assigned MongoDB a Buy rating last month and a $450 price target. They view the company as a leading vendor in the rapidly growing database market, where it is well-positioned to gain market share from larger players such as Amazon.com Inc. NASDAQ: AMZN and Microsoft Inc. NASDAQ: MSFT

Based on Thursday’s closing price, Bank of America’s price target suggests an upside of about 25%. This would place them above the peak in July and further strengthen the case for returning to previous highs. 

Snowflake Inc.

Snowflake Inc. NASDAQ: SNOW was approaching its all-time high this summer. However, Snowflake shares were unable to do so. They had been trading within a relatively narrow range since recovering from a 70% drop in June last year. To be fair, the previous summer had seen them trend upward towards the top of that range, but like MongoDB, they also decreased by about 30% into last month. 

This also appears to be a solid long-term entry point, with Capital One also assigning Snowflake shares an Overweight rating in this week’s update. They anticipate a renewed growth acceleration through 2024 and 2025, so the risk/reward profile seems quite appealing, with shares not far from all-time lows. 

It is the weaker of the two, as indicated by the “neutral” rating provided by Bank of America last month, whereas MongoDB was given a Buy rating. The team still anticipates Snowflake to gain market share due to its status as a pioneer, but the company’s consumption pricing model is struggling to be the growth engine it was expected to be.

They still have a price target of $195, and based on Thursday’s closing price, this indicates an upside of at least 25%. If achieved, this would place them at the top of the range they have been confined within for the past eighteen months, so their quarterly results will need to be strong to justify a breakout to the upside from there. 

While Amazon.com currently has a “Moderate Buy” rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

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