Why Are GitLab (GTLB) Shares Soaring Today
What Happened?
Shares of software development tools maker GitLab (NASDAQ:GTLB) jumped 6.2% in the morning session after Morgan Stanley analyst initiated coverage on the stock with an Overweight (Buy) rating and a $70 price target. The price target implied more than a 30% upside from where shares traded when the coverage was initiated.
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What The Market Is Telling Us
GitLab’s shares are very volatile and have had 29 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 7 months ago when the stock dropped 25.1% on the news that the company reported fourth-quarter results and provided full-year revenue guidance below expectations. In addition, its full-year EPS guidance significantly missed, coming in 43% below analysts' forecasts.
On the other hand, GitLab beat Wall Street's revenue estimates, driven by a better-than-expected net revenue retention rate (130% vs estimates of 127%). Furthermore, its number of customers with more than $100k in ARR significantly outperformed (955 vs estimates of 859).
During the quarter, GitLab appointed Sabrina Farmer as its Chief Technology Officer. Farmer joined the company from Google, where she was VP of Engineering. Overall, the results could have been better.
Following the results, Wall Street analysts largely maintained their sentiment toward Gitlab. Mizuho analyst Gregg Moskowitz lowered the price target on the stock from $87 to $75, adding, "We share investors' disappointment and surprise regarding the guidance...Nevertheless, we believe GTLB is oversold, and we remain confident in its ability to grow due to AI monetization, our view that management's estimate of a $10M-$20M FY25E revenue impact from pricing is conservative, and our research that indicates healthy upsell potential."
GitLab is down 11.2% since the beginning of the year, and at $53.39 per share, it is trading 31.2% below its 52-week high of $77.60 from February 2024. Investors who bought $1,000 worth of GitLab’s shares at the IPO in October 2021 would now be looking at an investment worth $513.43.
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