On Thursday, Mizuho Securities maintained its Outperform rating and $62.00 price target for GitLab Inc (NASDAQ:GTLB), amidst reports of the company potentially exploring a sale. The news has emerged shortly after GitLab's implementation of a change in control provision, which could lend support to the validity of the sale discussions.
GitLab, a firm specializing in DevOps software solutions, is reportedly in the early stages of considering a sale, with Datadog Inc . (NASDAQ:DDOG) identified as one of the interested parties.
Although the deal is said to be "weeks away," the potential acquisition is drawing attention due to the strategic fit between GitLab's offerings and those of a prospective buyer like Datadog, which operates in the same space with minimal solution overlap.
The analyst from Mizuho highlighted the complementary nature of the two companies' DevOps capabilities, suggesting that a merger could be beneficial for both sides. Furthermore, the analyst pointed out that GitLab's strong growth prospects—with a potential for over 30% revenue increase in the medium term—make it an attractive target for acquisition. Prior to the news of a possible sale, GitLab was trading at 8 times its projected 2025 revenue.
In light of these developments, Mizuho's reiteration of its price target suggests confidence in GitLab's value proposition. Additionally, the mention of other possible suitors indicates that the sale process could attract competitive interest, with Datadog not necessarily being the frontrunner in the acquisition talks.
In other recent news, GitLab Inc., a cloud-based software development tools provider, is exploring a potential sale amid acquisition interest. The company, backed by Alphabet (NASDAQ:GOOGL) Inc.'s venture capital arm, has attracted attention from potential buyers, including Datadog Inc.
GitLab, valued at around $8 billion, reported a 33% year-on-year revenue growth to $169.2 million and achieved positive cash flow for the first time in the latest quarter.
Simultaneously, Datadog, a prominent player in the observability market, has received positive feedback from several analyst firms. Mizuho Securities, Evercore ISI, and Loop Capital have all maintained their positive ratings for the company, citing potential for revenue growth, product expansion, and market leadership. However, Monness, Crespi, Hardt downgraded Datadog due to valuation concerns.
Wolfe Research maintained its Outperform rating for GitLab and highlighted the technical synergies between GitLab's developer pipeline and Datadog's observability tools. Despite this, the firm expressed a preference for Datadog to consider acquiring a more traditional security vendor.
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