Tuesday, KeyBanc adjusted its outlook on GitLab Inc (NASDAQ:GTLB), reducing the stock price target to $62 from $70, while keeping an Overweight rating on the stock. This change reflects a more cautious stance due to potential macroeconomic risks, despite the company's solid performance.
GitLab recently reported a slight top-line beat with revenue exceeding expectations by approximately $3 million, or 2%. This result was modest compared to KeyBanc's anticipated scenario of a $7 million to $9 million beat. However, the company's operating margin (OM) performance was notably strong, surpassing estimates by over 500 basis points in the first quarter.
For fiscal year 2025, GitLab has improved its margin outlook by nearly four percentage points at the midpoint. Management has also revised its revenue guidance upward by $7 million at the midpoint for the fiscal year. This update includes a $4 million incremental headwind from the updated Standalone Selling Price (SSP) analysis, which KeyBanc interprets as an "optical 'net raise.'"
KeyBanc remains positive about GitLab's potential in the DevSecOps market, acknowledging the company's opportunities for consolidation in a fragmented industry. Despite the positive outlook, KeyBanc has applied a 10x multiple on GitLab's fiscal year 2026 enterprise value to sales ratio, leading to the lowered price target of $62. This adjustment accounts for the additional macroeconomic uncertainties that could impact the company's performance.
In other recent news, GitLab Inc. has been the focus of several developments. The company reported impressive first-quarter results for fiscal year 2025, with a 33% year-over-year increase in revenue, reaching $169 million. This growth was largely driven by their thriving subscription business, marking the third consecutive quarter of accelerating growth. GitLab's Ultimate tier has been a significant factor, accounting for 46% of total revenue.
The company has also made strides in expanding its AI offerings and completed strategic acquisitions to enhance its security and compliance features. These recent developments highlight GitLab's strong market position and consistent growth trajectory.
Investor sentiment has been influenced by analysts' revisions of GitLab's price target. Piper Sandler maintained an Overweight rating with a target of $75, while Cantor Fitzgerald, Mizuho, and Bernstein adjusted their targets to $55, $62, and $70 respectively, all while maintaining positive ratings. These adjustments reflect shifts in comparable company multiples, despite GitLab's robust performance.
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