On Wednesday, KeyBanc Capital Markets reiterated its Overweight rating on GitLab Inc (NASDAQ:GTLB) with a steady price target of $62.00. The affirmation follows GitLab's strong performance in the second fiscal quarter, surpassing expectations with a revenue beat of $6 million.
Additionally, the company's forecast for fiscal year 2025 was adjusted upward by $8 million, reflecting a 28% year-over-year increase, and operating margins were improved by approximately 2.5 percentage points for the same fiscal year.
Despite a sequential quarterly contraction of 3 percentage points in the Dollar-Based Net Retention Rate (DBNRR) to 126%, GitLab exhibited robust forward-looking metrics. The company's Remaining Performance Obligations (RPO) surged by 51% year-over-year, while the calculated RPO (cRPO) saw a 42% year-over-year increase. These figures underscore GitLab's growing deal sizes and the continued adoption of its Ultimate tier, which increased by 1 percentage point quarter-over-quarter to account for 47% of the Annual Recurring Revenue (ARR).
GitLab's expansion is further supported by the adoption of its Duo product by significant clients, including KeyBank itself, Barclays, and F5, which have implemented thousands of seats. These customer testimonies provide a positive early indication of GitLab's traction in the market.
The company is positioned advantageously within the fragmented DevSecOps market, with opportunities for consolidation. KeyBanc's positive outlook is bolstered by potential growth catalysts such as the adoption of GitLab's Duo SKUs, price increases in the Premium tier, and the rollout of GitLab Dedicated. These elements are expected to contribute to the company's continued growth trajectory.
In other recent news, GitLab Inc. reported a robust second quarter, with a 31% increase in total revenue and a 42% surge in calculated remaining performance obligations.
This growth in revenue significantly contributed to the company's profit, with operating margins expanding dramatically. TD Cowen, Canaccord Genuity, and Piper Sandler have all expressed confidence in the company's performance, with TD Cowen raising its price target to $63 and maintaining a Buy rating.
GitLab's Ultimate tier product played a significant role in this success, accounting for 47% of the company's total Annual Recurring Revenue. The company also recently appointed Ashley Kramer as the Interim Chief Revenue Officer. Analysts from Baird, RBC Capital Markets, Cantor Fitzgerald, Wells Fargo, and BofA Securities have raised their price targets for GitLab, indicating confidence in its financial performance and growth potential.
InvestingPro Insights
GitLab Inc's (NASDAQ:GTLB) recent financial performance has caught the attention of investors, and the latest data from InvestingPro provides further insights into the company's financial health and market valuation. A notable InvestingPro Tip highlights that GitLab holds more cash than debt on its balance sheet, which could provide the company with a solid foundation to manage its growth and navigate market uncertainties. Additionally, the impressive gross profit margins, with a reported 89.63% in the last twelve months as of Q1 2023, underscore the company's ability to efficiently manage its costs relative to revenue.
InvestingPro Data also reveals that GitLab's market capitalization stands at $7.1 billion, reflecting the market's current valuation of the company. Despite not being profitable over the last twelve months, with a P/E ratio of -19.36, analysts have revised their earnings upwards for the upcoming period, signaling potential optimism about the company's future profitability. Moreover, GitLab's revenue growth remains strong at 34.15% in the last twelve months as of Q1 2023, indicating a robust expansion in its business operations.
For investors looking for more in-depth analysis, additional InvestingPro Tips are available, including insights on GitLab's stock performance and valuation multiples. With 21 analysts having revised their earnings upwards for the upcoming period, and the anticipation that the company will become profitable this year, these insights from InvestingPro could provide valuable context for evaluating GitLab's growth prospects and investment potential.
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