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Investing.com -- DA Davidson began coverage of GitLab with a Neutral rating and a $50 price target, saying the software firm’s discounted valuation is attractive but near-term growth drivers remain uncertain.
The broker noted GitLab shares have dropped about 22% this year on concerns that new generative AI coding tools could pressure demand and that enterprise developer headcounts may shrink.
That compares with a 6% gain in the iShares Expanded Tech-Software ETF.
GitLab guided to about $12 million of net new revenue for the fiscal second quarter, versus $13 million a year earlier.
Davidson said the company has historically posted average quarterly beats of around $6 million, suggesting a “more typical beat and raise” this time.
Still, it warned that recent business trends and field checks gave it little conviction of stronger upside.
The firm expects management to keep its guidance conservative, possibly lifting the full-year revenue outlook only by the size of the second-quarter beat.
Upside could come from adoption of GitLab Duo, its AI-based toolset, but Davidson said those benefits are more likely to show in the back half of the year.
On valuation, GitLab trades at roughly 26 times estimated 2026 free cash flow, versus peers at 34 times.
Davidson said the stock is becoming “too cheap to ignore” and could be a takeout candidate, but with growth lacking near-term catalysts it is staying neutral.