Analysts make surprise move on MongoDB stock price target before earnings | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

There’s a popular bumper sticker that says “I brake for hallucinations.”

It’s obviously intended as a joke, but in the world of artificial intelligence, hallucinations are no laughing matter.

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This occurs when an AI system generates false or misleading information, essentially “making up” details or facts that aren’t based on reality.

And the “information” often appears as confident and plausible outputs even though it’s incorrect.

AI’s penchant for generating legal fiction in case filings has led courts around the country to question or discipline lawyers in at least seven cases over the past two years and created a new high-tech headache for litigants and judges, according to Reuters.

The problem has cropped up in all kinds of lawsuits since chatbots like ChatGPT ushered in the AI era, highlighting a new litigation risk.

Last month, data-storage company MongoDB (MDB) announced that it had acquired the startup Voyage AI for roughly $220 million.

Voyage AI creates technology to safeguard against generative AI hallucinations.

MongoDB is scheduled to report quarterly results on March 5. The company is making an AI push.

MongoDB

MongoDB pushes deeper into AI

Tengyu Ma, Voyage AI co-founder and CEO, said the company accomplished this by building advanced AI-powered search and retrieval models that help extract meaning from specialized data sources, such as legal and financial documents and enterprise databases, Inc reported.

This capability can augment the responses of large language models to improve the odds of accuracy.

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“Inaccurate or low-quality results can create serious risks––especially in cases where the accuracy of information is critical, such as a hospital performing cancer screenings, a financial firm making autonomous investment decisions, or a law firm offering legal advice,” MongoDB said in a statement.

The people at MongoDB probably wish last year was a hallucination. The New York-based company was one of the Nasdaq’s top five worst-performing stocks, with shares ending down 43% in 2024.

In December, MongoDB said Michael Gordon would step down on Jan. 31 as chief financial officer and operating chief after a five-year tenure at the company.

Srdjan Tanjga, the company’s senior vice president of finance, was named interim CFO.

MongoDB beat Wall Street’s third-quarter earnings expectations in December. Dev Ittycheria, president and CEO, told analysts that the company “had a strong quarter of new business and executed well against our large market opportunity.”

“We remain confident in our ability to become an increasing strategic provider in our large and growing market,” he said. “Looking forward, we see a great opportunity to grow our adoption in the enterprise through new workloads, modernizing legacy applications, and winning the next generation of AI-powered applications.”

However, the stock fell due to disappointing guidance and lackluster results for Atlas, the company’s cloud database service.

At the time, Monness Crespi downgraded MongoDB to sell from neutral with a $220 price target and said Atlas was “mired in a protracted growth slump and void of the powerful tailwind implicit in the industry’s gen AI propaganda.”

MongoDB faces fierce competition

MongoDB will likely still play an important role long term in trends in the enterprise technology market, the firm said, but in the near-term, “we believe there is no place for MongoDB to hide from this onslaught of unforgiving forces.

However, Wedbush analysts named MongoDB as one its 10 AI stocks that will shine in 2025.

MongoDB is scheduled to report fourth-quarter earnings on March 5, and shares are up 14% year-to-date.

Several investment firms updated their ratings and price targets for MongoDB, including Monness Crespi, which boosted the company to neutral from sell with no price target.

The company has an opportunity to participate in long-term, secular trends in the database market, cloud and generative AI, but competition remains fierce, said the firm, which is looking for growth to decelerate to 19%.

Monness Crespi said it believes MongoDB will meet the firm’s fourth-quarter revenue forecast of $547 million and EPS estimate of $1.06.

Loop Capital analyst Yun Kim lowered the firm’s price target on MongoDB to $350 from $400 and kept a buy rating on the shares ahead of its Q4 results this week.

Kim said he believes that a positive trajectory of cloud consumption trend should continue in its cloud Atlas business, which should lead to a modest upside for this highly strategic business.

The analyst added, however, that he is not picking up signs of a sizable acceleration in the overall cloud consumption pattern, which is largely consistent with cloud infrastructure software vendors’ results so far in the current earnings season.

On Feb. 24, Bernstein analyst Firoz Valliji lowered the firm’s price target on MongoDB to $357 from $404 while keeping an outperform rating on the shares.

The analyst believes the company faces a more difficult setup heading into Q4 results. Next year’s guidance is an overhang for the stock.

Valliji added that the valuation for MongoDB has reset over the last three months.

As such, upcoming earnings could clarify what’s next for MongoDB’s stock, and the analyst recommended that investors evaluate the MongoDB buying opportunity after the earnings report.