In a report released yesterday, Koji Ikeda from Bank of America Securities reiterated a Buy rating on Gitlab (GTLB – Research Report), with a price target of $85.00.
Koji Ikeda has given his Buy rating due to a combination of factors that indicate GitLab’s strong position in a growing market and robust sales execution. Despite a less conservative guidance methodology that raises questions about the company’s revenue growth potential, Ikeda maintains that GitLab is well-positioned to disrupt the $50 billion+ DevSecOps market. This optimism is supported by the company’s ability to gain market share and the expectation that it can maintain a revenue growth rate of over 30% in the medium term. However, Ikeda acknowledges that the new guidance, which suggests a higher expense profile to sustain growth, and the operational margin guidance for FY25 might require some time for investors to fully digest, leading him to adjust the price objective slightly lower to $85.
Moreover, GitLab’s recent performance metrics bolster confidence in its trajectory, with accelerating growth in quarterly billings and remaining performance obligations, as well as a significant increase in large customers. The expansion of net revenue retention and a shift towards higher pricing contributions indicate strong demand and customer retention, further validating GitLab’s value proposition. Despite a deceleration in total customer growth, Ikeda suggests the company’s next growth phase may increasingly rely on larger, upmarket clients. The valuation at an $85 price objective reflects a premium over peers, justified by GitLab’s growth and profitability profile, as well as its expanding revenue retention, although tempered by the potential for less upside in FY25 revenue.
Ikeda covers the Technology sector, focusing on stocks such as Elastic, Dynatrace, and Datadog. According to TipRanks, Ikeda has an average return of 18.3% and a 62.55% success rate on recommended stocks.
In another report released today, Bernstein also maintained a Buy rating on the stock with a $76.00 price target.
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Gitlab (GTLB) Company Description:
GitLab Inc is the DevOps platform that empowers organizations to maximize the overall return on software development by delivering software faster and efficiently, while strengthening security and compliance.
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