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TD Cowen has adjusted its stance on GitLab Inc (NASDAQ: GTLB), a software company specializing in the DevOps lifecycle as the firm lowered its price target for GitLab to $58.00 from the previous $76.00. Despite the reduction, the firm continues to recommend a Buy rating for the stock.
The revision comes ahead of GitLab's second-quarter earnings report, which is scheduled for September 3. TD Cowen's analysis indicated an increase in churn within GitLab's go-to-market (GTM) teams. However, discussions with enterprise partners have been largely positive, particularly regarding demand in the Security sector.
TD Cowen highlighted that GitLab has recently reaffirmed its guidance, which is a positive signal. Nonetheless, the firm anticipates that the company's future earnings reports might not show as strong of a 'beat and raise' pattern as seen previously. This tempered expectation reflects a more conservative outlook on the company's short-term performance.
GitLab's valuation, according to TD Cowen, remains appealing, trading at approximately 7 times its estimated sales for the calendar year 2025 (EV/CY25E Sales). This is set against a backdrop of anticipated revenue growth of around 30% in calendar year 2024.
In other recent news, GitLab Inc. has been the subject of multiple analyst assessments and corporate developments. Mizuho reduced its price target for GitLab from $62.00 to $58.00, citing tempered revenue expectations for the quarter, but maintained its Outperform rating. This decision follows channel checks suggesting a slower initial adoption of GitLab's latest offering, Duo Pro (AI).
Meanwhile, GitLab confirmed its financial guidance for the second quarter and fiscal year 2025, projecting Q2 revenues between $176.0 million and $177.0 million, and fiscal year revenues between $733.0 million and $737.0 million. Following the resignation of its Chief Revenue Officer, Christopher Weber, the company appointed Ashley Kramer as the Interim Chief Revenue Officer.
Wolfe Research maintained its Outperform rating and $56.00 price target for GitLab amidst early reports of GitLab engaging in acquisition talks, with Datadog (NASDAQ:DDOG) Inc identified as a potential buyer. TD Cowen also held its Buy rating on GitLab with a steadfast stock price target of $76.00, following the launch of GitLab 17, which introduced significant updates aimed at enhancing the software development platform.
RBC Capital maintained its Outperform rating and a $65.00 price target for GitLab, highlighting the company's potential growth catalysts and expanded capabilities in artificial intelligence, analytics, compliance features, and workflow enhancements.
InvestingPro Insights
As GitLab Inc (NASDAQ:GTLB) heads towards its next earnings report, investors are watching the company's financial health and market performance closely. According to InvestingPro data, GitLab boasts a robust gross profit margin of 89.63% for the last twelve months as of Q1 2023, underscoring the company's ability to maintain profitability in its core operations. Additionally, the company's revenue growth remains strong, with an impressive 34.15% increase over the last twelve months as of Q1 2023.
InvestingPro Tips highlight that GitLab holds more cash than debt on its balance sheet and liquid assets exceed its short-term obligations, suggesting a solid financial position for managing its liabilities. Furthermore, 21 analysts have revised their earnings upwards for the upcoming period, reflecting an optimistic outlook for the company's financial future. However, it's important to note that GitLab is not profitable over the last twelve months, and the stock has experienced a significant decline over the last six months, indicating potential volatility and investor caution.
Investors interested in deeper analysis can find additional tips on GitLab, including insights on valuation multiples and profitability predictions for the year, by visiting InvestingPro GitLab. With these insights, market watchers can better gauge the company's trajectory as it approaches its earnings report in September.
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