Nearing its 52-week low, this growth stock could be the bargain of the year!

Shares of this US technology giant have fallen from grace in 2024, but is the growth stock now valued at an incredibly cheap price?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Businesswoman analyses profitability of working company with digital virtual screen

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

When hunting for growth stocks, searching among the firms trading close to their 52-week low can reveal some interesting opportunities. These companies are either having serious problems, or the market has undervalued their future prospects. The latter is where impressive returns can be achieved in the long run.

So, when looking at MongoDB (NASDAQ:MDB), whose shares are down almost 40% in a year, the question becomes, is this a buying opportunity? Let’s take a look.

Volatility in technology

Like many tech stocks in the US, MongoDB shares are no stranger to volatility. The NoSQL database provider has gotten a lot of attention in recent years, both from investors and businesses alike. Its technology serves as an alternative to traditional relational databases and is far better equipped for handling humongous datasets of unstructured data.

Like many tools in the tech space, MongoDB’s platform is not suitable for every task. But for machine learning and AI, it’s a perfect fit. And that certainly gives it some exciting long-term potential that’s already being used by 47,800 customers, including leading British firms like Vodafone, Barclays, and AstraZeneca, among others.

Prior to inflation entering the mix, the growth stock was on a rampage, surging more than 1,700% between 2017 and 2021. But like many tech stocks, the stock market correction proved brutal, with a 60% slide in 2022. Things appeared to be steadily getting back on track until its most recent earnings report sent shares tumbling once more. What happened?

Outlook and expectations

Despite what the recent tumble in market cap would suggest, MongoDB actually beat its adjusted earnings target. Analysts were expecting adjusted profits on a per-share basis to land at $0.40. Instead, they actually came in at $0.51 – 27.5% higher. Revenue also came in higher than expected at $450.6m versus $439.6m. So, why were investors so eager to sell?

The answer lies in management’s guidance. Despite achieving double-digit growth, the firm has reported signs of things slowing down more than initially anticipated. Subsequently, management cut its full-year guidance to an underwhelming level. And when trading at high multiples, that’s a welcome invitation to volatility.

It’s worth remembering that the US is currently suffering from a rebound of inflation, which now sits at 3.4% despite falling to 3.1% at the start of 2024. That’s ahead of the Federal Reserve’s target of 2%, which means interest rate cuts have been delayed. As such, more businesses, including MongoDB’s current and potential customers, are largely avoiding spending as much as possible, making growth more challenging.

However, that could quickly change once rate cuts start entering the picture. And with it, MongoDB’s growth could resume its historical surge, sending the share price back in the right direction.

There’s no denying that an investment in this enterprise carries significant risk. But given its long term potential, considering a small position could prove lucrative once economic conditions improve. At least, that’s what I think.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Zaven Boyrazian has positions in MongoDB. The Motley Fool UK has recommended MongoDB. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

This has to be one of the best UK stocks to buy, IMO! Here’s what the charts say

UK stocks are often considered undervalued, but very few appear to come close to this one. Dr James Fox explains…

Read more »

Investing Articles

Forecast: in 12 months, the Barclays share price could be…

The Barclays share price has surged over the past 12 months, but where will it go next? Dr James Fox…

Read more »

Chalkboard representation of risk versus reward on a pair of scales
Investing Articles

1 top stock offering incredible value right now!

After its recent decline, this high-quality tech share benefitting from artificial intelligence is trading more like a value stock.

Read more »

The Troat Inn on River Cherwell in Oxford. England
Investing Articles

Down 21% in 6 months! Should I buy the dip in this FTSE 250 stock?

Ben McPoland is wondering whether he should add struggling FTSE 250 share JD Wetherspoon to his Stocks and Shares ISA…

Read more »

Investing Articles

As the ISA deadline looms, here are 2 dividend-paying stocks I have been loading up on

With the opportunity to invest up to £20,000 in an ISA available, Andrew Mackie looks at two of his favourite…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

Here’s how Bitcoin could help an investor earn a £10,000 monthly passive income

Millions of Britons invest in stocks and shares in order to earn a passive income. Here, Dr James Fox explains…

Read more »

Investing Articles

$500 or $100: how much is Tesla stock really worth in 2025?

Tesla stock has fallen from $488 to $249 in the space of a few months. Is there value on offer…

Read more »

Dividend Shares

Fully using the £20k ISA allowance could make this much passive income

Jon Smith explains how much passive income could be made over time if an investor focused purely on building up…

Read more »