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I am buying this SaaS company. #1 out of 4

March 1, 2024
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I am gradually buying 4 SaaS companies. I will cover all of them over the next month.

I am buying 4 Saas companies. (GRADUALLY)

I say gradually, because I have a gut feeling that they could still go lower.

The thing is, nobody knows where the bottom is.

The market does not like unprofitable companies at the moment, so we could see more pressure over the next few months.

That is why I am dollar cost averaging in. I am buying over the next 18 months in tranches, because I like these businesses for the long term.

Yes, they are still expensive, but holding for 10 years could pay off handsomly.
 

Why does SaaS businesses trade at such high mutliples?

  • Recurring revenue
  • Sticky products
  • High net retention
  • High net expansion
  • High margins with scale

 

The 1st company on my radar, is MongoDB

MongoDB is a Developer Data Platform.

Developers love MongodDB.

Smart money often follows developer preferences.

I personally know various companies that use MongoDB. It is a STICKY PRODUCT.

"MongoDB enables developers to build mission-critical applications that drive better user experiences, enable new capabilities, and improve operational efficiency," CEO Dev Ittycheria
 
Some of their Customers include, Adobe, Google and eBay.

What they do

MongoDB Atlas automates infrastructure provisioning, setup, and deployment so your teams can get the database resources they need, when they need them. Patches and minor version upgrades are applied automatically. And when you need to modify your cluster whether its to scale out or perform an upgrade MongoDB Atlas lets you do so in a few clicks with no downtime window required.

Share Price = $276

Market Cap = $18.8 Billion
 

FINANCIALS Q1

Revenue 

$285.4 million, up 57% YoY

 

Gross Profit

Gross profit was $207.2 million for the first quarter fiscal 2023, representing a 73% gross margin compared to 70% in the previous period. Non-GAAP gross profit was $214.3 million, representing a 75% non-GAAP gross margin, compared to a non-GAAP gross margin of 72% in the previous period.

 

Loss from Operations

Loss from operations was $75.9 million for the first quarter fiscal 2023, compared to a loss of $61.4 million in the year-ago period.


Net Loss

Net loss was $77.3 million, or $1.14 per share, based on 67.7 million weighted-average shares outstanding, for the first quarter fiscal 2023. This compares to a net loss of $64.0 million, or $1.04 per share


Cash

As of April 30, 2022, MongoDB had $1.8 billion in cash

MongoDB generated $11.6 million of cash from operations, used $2.5 million of cash in capital expenditures and used $0.6 million of cash in principal repayments of finance leases, leading to free cash flow of $8.4 million, compared to free cash flow of $8.4 million in the year-ago period

 

Revenue Guidance

Q2: $279-$282 million

Full year: Approx $1.186 billion

 

CEO Rating

Their CEO received a rating of 97% on Glassdoor, which is very high.

To date, they have also executed incredibly well!

 

Opinion

This is not a stock for the classic value investors.

I love businesses that are sticky, recurring revenue models, in high demand and a big addressable market.

MongoDB ticks all of these boxes.

They are expansion partnership integration with the likes of Amazon and Google, making the product and distribution better.

They are also showing positive signs regarding profitability.

Yes, they are still expensive, but it is already MUCH cheaper than a few months back.

As VC money declines for new startups, so does the threat of new entrants.

I added a small position in my portfolio, for the long term. (Unless fundamentals change)

I will add consistantly and gradually over the next 18 months.

I added 4 SaaS companies recently.

MongoDB is one them.

I will share the others over the next month.

 

(Disclaimer: This is not financial advice. This is what I am doing with my personal finances and is only for informational purposes. Always do your own due diligence.)

 

 


 


 


 


 


 


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