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Investing.com - CapitalOne downgraded GitLab Inc (NASDAQ:GTLB) from Overweight to Equal-weight on Wednesday, while lowering its price target to $46.00 from $54.00. The stock has already declined 8.5% in the past week and 33% over the last six months, according to InvestingPro data.
The downgrade reflects growing concerns about GitLab’s product differentiation as certain features become more commoditized in the software development market.
CapitalOne pointed to GitLab’s recent decision to include Duo Essentials, which features Code Suggestions and Chat, in its Premium and Ultimate tiers at no additional cost, as announced during the GitLab 18 release webinar on June 24.
The research firm expressed concern that more features could become part of broader tier packaging over time, potentially putting pressure on average revenue per user (ARPU).
CapitalOne also highlighted potential competitive threats from Cursor and Windsurf, noting they pose "a legitimate risk to future growth" despite their current focus on code generation, which GitLab estimates accounts for only 20% of developers’ time.
In other recent news, GitLab Inc. reported a modest revenue beat of $1.5 million for the first quarter, with no changes to its full-year revenue guidance. Despite the modest increase, the company achieved a 40% year-over-year growth in remaining performance obligations and a 34% growth in current RPO. GitLab also expanded its non-GAAP operating margin by 14 percentage points to 12%, surpassing earnings per share expectations and raising full-year operating income and EPS guidance. On the product side, GitLab introduced the Duo Enterprise feature, available to both Premium and Ultimate customers, and expanded partnerships with Amazon (NASDAQ:AMZN) and Anthropic.
Analyst firms have shown varied reactions to these developments. Macquarie maintained its Outperform rating but lowered the price target to $75, citing a "disappointing" quarter. Canaccord Genuity also adjusted its price target to $76 from $78 due to valuation shifts but maintained a Buy rating. Meanwhile, Rosenblatt Securities initiated coverage with a Buy rating and a $58 price target, emphasizing GitLab’s comprehensive DevSecOps platform and growth potential. BofA Securities reiterated its Buy rating with a $72 price target, expressing confidence in GitLab’s long-term market share potential and AI strategy. William Blair also maintained an Outperform rating, highlighting GitLab’s strong financial performance and product enhancements with the GitLab 18 release.
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