By Sam Boughedda
BofA reiterated a Buy rating and raised its price target for GitLab Inc (NASDAQ:GTLB) shares to $78 from $76 in a note to clients on Tuesday.
Analysts told investors the price target raise is based on survey results that suggest installed-base spending intentions on GitLab "should remain relatively healthy in 2023." This has increased BofA's confidence that "the strong beat-and-raise trend the business has been displaying since its IPO should continue when the company reports its F3Q results on Monday 12/5."
"Specifically, 56% of the 213 GitLab users we surveyed plan to increase spending in CY2023, compared to 33% that plan to decrease spending. This implies a net-basis (56% increase less 33% decrease) of +23, which we view as a positive heading into next year. We believe the survey results suggest there is still plenty of white space for GitLab to expand within its installed-base and that GitLab’s 130%+ NRR is sustainable over the medium term," wrote the analysts.
In addition, BofA said that 74% of people surveyed indicated that a free tier user limit could result in paid conversions.
"Using the survey results, our analysis suggests the program could drive an incremental $5.3mn in ARR, which is not a meaningful needle mover, but does support future revenue growth trends, in our view. Our $78 PO is derived using 21.5x EV/FY24e revs (was 21.0x), using a higher multiple based on positive survey results," they concluded.