Despite market-beating results for the first quarter of Fiscal 2025, shares of GitLab (NASDAQ:GTLB), a leading provider of AI-assisted workflows for the software development lifecycle, have continued to slide. GTLB stock has suffered a 31% decline this year due to stiff competition and a broader slump in the SaaS (Software as a Service) sector. Shares are relatively fully valued and continue to show negative price momentum, suggesting investors might want to hold off until the stock price turns around or the shares enter value territory.
GitLab Expands its DevSecOps Platform
GitLab is an open-source software service provider. Its DevSecOps Platform is designed to simplify and expedite the software development process and currently services an estimated 30 million users globally, including over 1 million active license users.
Artificial intelligence has transformed software development, often making the process increasingly complex due to the expanding number of software tools required. GitLab continues to add new capabilities and AI tools for planning, security, and operations on its platform.
Further, the DevSecOps platform has incorporated security measures throughout the software development life cycle. The company recently enhanced its integrated security through the acquisition of Oxeye for its robust SAST (Static application security testing) technology, which optimizes vulnerability management and remediation. Gitlab also purchased Rezilion’s intellectual property to boost its vulnerability risk data, auto-remediation capabilities, and runtime vulnerability reachability.
Analysis of GitLab’s Financials
GitLab’s Q1 FY25 (ended April 30, 2024) results reflected resilience amid a weak market due to stable demand, an extended customer base, and robust enterprise strength. Total revenue reached $169.2 million, exceeding the consensus estimate of $165.89 million and marking a 33% year-over-year surge. Earnings per share of $0.03 came in significantly above the loss per share of $0.04 anticipated by analysts.
Management expects revenue to be between $176 and $177 million in Q2 and $733 and $737 million for the full-year Fiscal 2025. Non-GAAP operating income is expected to be in the range of $10 to $11 million for Q2 and $34 to $38 million for FY 2025. Non-GAAP diluted net income per share is projected in the range of $0.09 to $0.10 for Q2.
What is the Price Target for GTLB Stock?
Although GTLB beat Q1 estimates, many analysts lowered their price targets for the stock. For example, Canaccord analyst Kingsley Crane recently dropped the price target from $74 to $65 while keeping a Buy rating on the shares. He noted the firm’s Q1 surprising performance against weaker results from software peers in a lackluster software buying environment.
Overall, GitLab scores a Strong Buy based on 22 analysts’ recommendations, of which 17 are Buy ratings. The average price target for GTLB stock is $65.65, which represents a potential upside of 51.3% from current levels.
The stock is highly volatile, with a beta of 2.17, though it has been on a downward trend overall for some time. The shares trade at the low end of their 52-week price range of $40.19 – $78.53 and continue to demonstrate negative price momentum, trading below the 20-day (48.16) and 50-day (52.24) moving averages. Despite the extended slide in price, the stock appears relatively fully valued, with a P/S ratio of 10.93x, slightly above the 9.72x its peers in the Software Infrastructure industry trade at.
Closing Thoughts on GTLB
GitLab has exhibited resilience in a challenging backdrop. However, despite the top- and bottom-line beats, shares have continued to decline. The stock continues to demonstrate negative price momentum and appears relatively fully valued. As such, investors might want to hold off until the stock trades at more attractive levels.
