2023-04-12 08:22:32 ET
MongoDB ( NASDAQ: MDB ) and Confluent ( NASDAQ: CFLT ) shares rose in premarket trading on Wednesday as investment firm Morgan Stanley upgraded the software companies on expectations that customers will continue to make faster transitions to the cloud.
Analyst Sanjit Singh raised his rating on both MongoDB ( MDB ) and Confluent ( CFLT ) to overweight from equal-weight and boosted the respective price targets to $270 and $30, up from $230 and $29, noting that a recent survey of CIOs in both the U.S. and E.U. showed an active engagement in cloud optimization moves.
In addition, Singh noted that the survey found that companies that are either optimizing or will do so, expect to see an acceleration next year. They also have more applications already running in the public cloud.
Singh said MongoDB ( MDB ) is likely to benefit from its spot in the database market and could see the stock trade higher as a result.
"[W]e see a path emerge for MDB shares to re-rate higher and trade back in-line with its historical premium to SMID cap peers, as cloud migration momentum, relational displacement, and potential AI development will drive more interest on the back of our view that optimization efforts are likely troughing in [first-half of 2023]," Singh wrote in an investor note.
On Confluent ( CFLT ), Singh said though the stock has moved lower in recent months, there have been "several prooft points" that estimates for 2023 and 2024 could be more achievable and headwinds are subsiding.
"We see a catalyst path emerging which could drive shares to re-rate higher, as channel checks/surveys start showing a second derivative change in cloud optimizations, estimates are revised higher throughout the year, and the upcoming analyst day in June reveals new use cases and progress against an unchanged long-term opportunity," Singh wrote in a separate note.
MongoDB ( MDB ) gained 3% while Confluent ( CFLT ) tacked on 3.4% in premarket trading following the upgrades.
Late last month, Wedbush Securities listed MongoDB ( MDB ) as one of the tech companies best prepared for earnings season .
Analysts are largely bullish on MongoDB ( MDB ). It has a HOLD rating from Seeking Alpha authors , while Wall Street analysts rate it a BUY . Conversely, Seeking Alpha's quant system, which consistently beats the market, rates MDB a BUY .
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MongoDB, Confluent rise as Morgan Stanley upgrades on faster cloud transitions