GitLab stock price target lowered to $65 by FBN Securities on mixed results

Investing.com - FBN Securities has reduced its price target on GitLab Inc (NASDAQ:GTLB) to $65.00 from $75.00 while maintaining an Outperform rating following the company’s latest quarterly results. According to InvestingPro data, GitLab maintains impressive gross profit margins of 88.64% and is currently trading at $42.91, with analyst targets ranging from $44 to $76.

The software development platform reported revenue growth of 29% year-over-year in its fiscal second quarter, exceeding consensus estimates by 4%. GitLab posted remaining performance obligations (RPO) of $988.2 million, representing 32% growth year-over-year, though this fell short of FBN’s 37% growth estimate. InvestingPro analysis reveals the company holds more cash than debt on its balance sheet, with a healthy current ratio of 2.48.

Current RPO, which FBN considers GitLab’s second most important top-line metric after revenue, reached $621.6 million, up 31% year-over-year but slightly below the consensus expectation of $629.5 million. Billings came in at $244.5 million, growing 21% year-over-year and essentially matching the consensus of $244.7 million.

Despite these somewhat underwhelming top-line metrics, GitLab impressed on profitability measures. The company achieved a non-GAAP operating margin of 16.8%, representing a 6.8 percentage point improvement year-over-year and exceeding consensus expectations by 6.2 percentage points. InvestingPro subscribers can access detailed financial health scores and 8 additional ProTips that provide deeper insights into GitLab’s performance and valuation metrics.

The stronger-than-expected operating margin resulted from both the revenue outperformance and controlled expenses, with non-GAAP operating expenses of $172.2 million growing 17% year-over-year, lower than FBN’s estimate of $181.2 million.

In other recent news, GitLab Inc reported strong second-quarter results with a 29% increase in revenue, surpassing analyst expectations. This performance was driven by subscription revenue, which grew 30% year-over-year and accounted for 90% of the total revenue. Despite these positive results, the departure of Chief Financial Officer Brian Robins to join Snowflake has raised concerns. Various analyst firms have adjusted their outlooks in response to these developments. Truist Securities lowered its price target to $55, citing a cautious outlook for the second half of the year, while maintaining a Buy rating. Piper Sandler also reduced its price target to $70, acknowledging GitLab’s strong revenue beat and improved margins despite leadership changes. Mizuho adjusted its target to $52, noting the company’s favorable revenue mix shift. Meanwhile, Rosenblatt Securities maintained its Buy rating and $58 price target, emphasizing the strong subscription revenue growth. These recent developments highlight the mixed sentiment among analysts regarding GitLab’s future prospects.

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