Investing.com — Wolfe Research initiated coverage of MongoDB (NASDAQ:MDB) with an Outperform rating and a $280 price target in a note Wednesday.

The firm highlighted a conservative setup, market tailwinds, and a compelling valuation as reasons to be bullish on the stock.

“While it’s not easy defending decelerating growth with decaying margins,” analysts wrote, “we see a conservative numbers setup… with improving execution… and market tailwinds that at current valuations mark an opportunity too difficult to ignore!”

Despite a 10% year-to-date decline in MongoDB shares, Wolfe sees the company well-positioned for upside.

“MDB sits at the intersection of two powerful secular shifts: Enterprise Data Modernization and the early innings of AI deployment.”

Wolfe highlighted stabilizing top-line growth and improving margins, noting that their upside model implies high teens margins and roughly $400 million in incremental revenue next year.

Wolfe also underscored the size and structure of MongoDB’s market. “This is STILL a $120B+ market growing double digits with some of the best terminal margins in all of software… and Mongo is a TOP 5 vendor (#1 in Document Stores),” they wrote.

Furthermore, the analysts believe that investor sentiment is shifting from applications to infrastructure, where “unit economics makes it a bit easier to bet lower in the stack.”

Year-to-date, infrastructure stocks are up 14% compared to a 2% decline for broader application names.

“In a market of Data > Apps… MDB stands as one of the few companies that fits the mold as a top 20 growth company (@ $2B scale),” added Wolfe Research.

The firm concluded, “Better numbers, Better narrative and Better margins [are] setting the stage for a Better stock.”

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