areecep wrote a post · Mar 7 02:07

Tech Earnings Recap: Gitlab - Why the Big Drop? Should You Hold onto Calls?

The trajectory of $E-mini NASDAQ 100 Futures(JUN4)(NQmain.US)$ for this week may be somewhat complex, influenced by numerous factors, making predictions challenging. Currently, there isn't a clear indication of significant capital outflows. It seems more like a temporary sideline stance, suggesting a minor pullback.

Personally, I don't foresee a substantial pullback. As mentioned in last week's post, there isn't excessive bobble in M7. According to Ray Dalio, founder of Bridgewater Associates, $Alphabet-C(GOOG.US)$ and $Meta Platforms(META.US)$ even seem undervalued. The market cap growth of M7 remains aligned with profit growth.

Additionally, $NVIDIA(NVDA.US)$ has a forward P/E ratio of only 70 post its recent surge, whereas during the peak of the 2000 bubble, $Cisco(CSCO.US)$ had a forward P/E ratio of over 200 (the numbers might not be exact, but you get the idea).

Let's delve into Gitlab $Gitlab(GTLB.US)$ 's earnings report,

Q4 FY2024
Expected EPS: $0.08 Actual EPS: $0.15
Expected Total Revenue: $157.89 million Actual Total Revenue: $163.8 million
Revenue and EPS both beat expectations!

1. Why the Significant Post-market Drop?

The reason behind the post-market drop can only be attributed to guidance falling short of expectations.

Firstly, looking at the Q1 FY2025 guidance, the company anticipates Q1 revenue to be between $165-166 million, falling short of the market's expectation of $162.1 million; EPS is estimated to be between $0.04-0.05, below the market's expectation of $0.06.

Lastly, examining the full-year guidance, for FY2025, the projected total revenue is between $725-731 million, lower than the market's expectation of $730.2 million; EPS is expected to range from $0.19-0.23, below the market's expectation of $0.35.

Currently, my personal ability to gather guidance information is insufficient, as I assumed the FY2025 guidance would be better, given that management raised the full-year guidance after the third-quarter report. I need to improve my ability to forecast and assess guidance.

2. Can I Still Hold My Calls?

Due to my personal oversight of not hedging with puts, and my confidence in its performance and guidance, I didn't hedge. Additionally, since I didn't plan to hold, I intended to close the position immediately after the market opened the next day. Therefore, my call option became invalid.

As for those who bought slightly longer-dated call options, they might still have a chance. In situations like this, it usually requires a consolidation period of 2-3 weeks.

I'll review $CrowdStrike(CRWD.US)$ 's data again to see if I need to add some puts to strengthen the hedge. It seems that the Q1 FY2025 guidance should lean towards being more pessimistic.

The above content represents personal opinions and views and should not be considered as investment advice. Let's exchange ideas and grow together with fellow investors!

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areecep

Some famous words of Buffett. I hope it's useful to you. : )

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