MongoDB’s stock just took a beating based on one analyst’s misunderstanding of how technology decisions are made.
Wall Street may get paid a lot to invest other people’s money, but that doesn’t mean they’re particularly bright. As a case in point, MongoDB’s stock price on Tuesday dropped roughly 9%. The reason? Analysts at Nomura Instinet reported rumors that Lyft “is quite dissatisfied with Mongo’s performance and is in the process of a massive database migration,” as reported by CNBC. This, coupled with the separate (and apparently quite unrelated) announcement that Lyft is going “all in” on AWS, caused MongoDB’s stock to shed hundreds of millions in value. Because…why, exactly?All your MongoDB are belong to us
Yes, we’re still swimming in a soup of fear, uncertainty, and doubt over the big cloud companies and their impact on open source projects like MongoDB. MongoDB, Redis Labs, and Confluent (Kafka) have each released some or all of their code under new licenses designed to keep companies like AWS at bay. As MongoDB CTO and co-founder Eliot Horowitz told me recently, the purpose of the company’s Server Side Public License is simply to encourage companies like AWS to participate equally in MongoDB’s success. MongoDB has spent hundreds of millions of dollars developing a popular and powerful database. It’s not asking too much, he reasons, for a company like AWS to kick in some of the code used to operate MongoDB at scale. It’s a reasonable consideration, but it’s not really what’s at stake with Lyft’s decision to go “all in” on AWS. That decision almost certainly has nothing to do with MongoDB. Yes, MongoDB might be a casualty as Lyft seeks to run more of its infrastructure services with the cloud leader, but in this scenario MongoDB isn’t a particular target—it’s just collateral damage. AWS, as I’ve written, has announced scores of “all in on AWS” customers; each of those companies almost certainly runs MongoDB in some fashion. My guess? Each of those companies will continue to run MongoDB for a variety of applications, even as they go “all in” on AWS. Within any company of heft and scale, no one ever truly goes “all in” on any particular technology or vendor—it’s simply too hard to corral all those cats, and it’s almost never worth it. There are applications at Lyft, for example, that were designed for MongoDB and no AWS service—not even its MongoDB 3.6 API-compatible DocumentDB—will offer a suitable substitute.So why are those investors panicking?
Back to the Nomura Instinet research note, published by one of its analysts, Christopher Eberle. Eberle isn’t a believer in MongoDB; he has a “sell” opinion on the stock, with a target price of $63/share. (Even with the 9% drop, MongoDB trades at nearly $100/share, so he’ll have to publish several more negative reports to get the stock into his range.) He claims Lyft is a “marquee customer” of MongoDB’s but dig around on MongoDB’s site and you won’t find a Lyft case study. You can, however, find a Lyft case study on mLab’s site. MongoDB purchased mLab last year. There, Lyft CTO Chris Lambert is quoted as saying, “We’ve been with mLab since the very beginning and haven’t looked back. They have continued to deliver an outstanding fully managed [MongoDB] Database-as-a-Service platform, and we have enjoyed working with their world-class support team.” Lambert is quoted in the AWS press release, extolling the virtues of AWS: “We built our business on AWS from the very beginning, taking advantage of their extensive compute power, depth and breadth of services, and expertise to develop an effective cloud infrastructure to support our growing business and goal of improving people’s lives with transportation.” Both of these statements by Lambert can be true at the same time. Indeed, they have been true at the same time for years. It could be, as Eberle wrote in his note, that Lyft is actively looking at migrating some or all of its applications away from MongoDB. This in itself is not very interesting. Enterprises change their technology choices all the time, and one company’s decision to move away from MongoDB or another technology is almost certainly balanced or outweighed by another enterprise’s decision to embrace it. If not, every tech company’s stock besides Amazon’s should be shorted. With every “all in” announcement AWS makes, are investors going to dump every other vendor those enterprises are using en masse, following some bizarre herd instinct that tells them “if AWS wins this account, all other vendors are doomed?” If so, many more companies besides MongoDB should be seeing their share prices plummet. But if not, it would be wise to not follow one alarmist analyst who has overengineered the importance of one company’s alleged move away from MongoDB into some industry-wide trend—a trend that is directly countered by MongoDB’s ever swelling Atlas (database-as-a-service) business.
