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Piper Sandler maintained its Overweight rating and $85.00 price target on GitLab Inc (NASDAQ:GTLB) following the company’s first-quarter results. According to InvestingPro data, GitLab maintains impressive gross profit margins of 88.79% and holds more cash than debt on its balance sheet. While GitLab delivered its lowest revenue beat since going public, the company still exceeded Street estimates across all metrics in what it described as "a challenging environment."
The software development platform posted what Piper Sandler characterized as "solid" first-quarter performance, highlighted by acceleration in short-term billings growth and a "meaningful" free cash flow beat. With a healthy current ratio of 2.45 and liquid assets exceeding short-term obligations, GitLab’s financial position remains strong. Despite these positive indicators, GitLab shares traded lower in after-hours activity, which the research firm attributed to the modest revenue beat and management’s decision not to raise guidance.
Piper Sandler expressed confidence in GitLab as a "top idea" in its coverage universe, pointing to the company’s valuation of approximately 5 times estimated calendar year 2026 revenue. InvestingPro analysis shows robust revenue growth of 30.93% over the last twelve months, with analysts expecting continued profitability improvement. The firm emphasized this multiple appears reasonable given GitLab’s growth rate exceeding 20% while maintaining "rule of 40+" performance, which refers to the combined percentage of revenue growth and profit margin.
The research firm highlighted GitLab’s growing artificial intelligence portfolio, strong enterprise customer base, and impressive net revenue retention as fundamental strengths supporting its positive outlook. Piper Sandler also noted continued strong adoption of GitLab’s Duo offering and upcoming innovations that could drive increased platform adoption.
GitLab maintained its previous financial guidance, which Piper Sandler acknowledged "is unlikely to satisfy momentum investors." Nevertheless, the firm reaffirmed its belief that the risk/reward profile for GitLab remains "compelling at current levels" due to what it views as a modest valuation relative to the company’s strong fundamental performance.
In other recent news, GitLab’s fiscal first-quarter results have prompted several analysts to adjust their price targets on the company’s stock. Bernstein SocGen Group reduced its target to $70.00 from $76.00, citing a modest revenue beat of just 0.9% above expectations. Similarly, Needham lowered its target to $55.00 from $85.00, pointing to GitLab’s "thinnest beat on record" and challenges from increased SaaS mix and market competition. Scotiabank (TSX:BNS) also cut its target to $60.00 from $67.00, noting issues with linearity and SaaS bookings. Cantor Fitzgerald adjusted its price target to $60.00 from $70.00 due to lower peer group multiples, despite GitLab exceeding consensus estimates on revenue and other financial metrics. Mizuho (NYSE:MFG) followed suit, reducing its target to $60.00 from $72.00, while maintaining an Outperform rating. GitLab’s revenue growth of 27% slightly surpassed Wall Street’s forecast, but analysts expressed concerns over the modest beat. Despite these adjustments, some firms remain optimistic about GitLab’s long-term growth prospects, highlighting its strategic initiatives and market position.
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