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Baird boosts GitLab stock target on strong Q3 and DevSecOps lead

EditorNatashya Angelica
Published 07/12/2024, 02:00 am
GTLB
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On Friday, Baird has increased its price target for GitLab Inc (NASDAQ:GTLB) shares, a significant player in the DevSecOps sector, from $62.00 to $75.00 while maintaining an Outperform rating. This adjustment follows GitLab's robust performance in the third quarter, highlighting the growing adoption of its services.

According to InvestingPro data, GitLab maintains a strong financial position with cash reserves exceeding debt obligations, while demonstrating impressive gross profit margins.

GitLab's Ultimate tier continues to exhibit solid growth, now representing approximately 48% of the company's total Annual Recurring Revenue (ARR), marking a quarter-over-quarter increase. Moreover, the Duo Enterprise tier has been a significant contributor, accounting for over 25% of net-ARR in key deals.

GitLab also reported an impressive 13.2% operating margin, which is a substantial year-over-year improvement of 1,000 basis points. While InvestingPro analysis shows the company trading at high revenue and Price/Book multiples, analysts predict profitability this year.

The company's DevSecOps platform is gaining traction, primarily driven by the Advanced Static Application Security Testing (Advanced-SAST) feature. Baird's positive outlook on GitLab is further reinforced by the company's leadership in DevSecOps and AI, the traction of its Ultimate, Duo, and Dedicated offerings, momentum in the public sector, and strategic partnerships, such as the one with AWS-Quality.

The momentum is reflected in GitLab's strong market performance, with InvestingPro showing significant price appreciation over both three- and six-month periods. For deeper insights into GitLab's valuation and growth metrics, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

In a strategic move, Bill Staples, the former CEO of New Relic (NYSE:NEWR), has been appointed as the new CEO of GitLab. The co-founder Sid Sijbrandij will now focus on his health while continuing to serve as the Executive Chairman. Baird regards Staples' appointment as CEO to be a strong decision for GitLab's future.

In other recent news, GitLab Inc has been the focus of several investment firms following robust third-quarter results for fiscal year 2025. The company's revenue growth of 32.4% and a significant profit surge with operating margins reaching a record 13% have led to raised price targets from analysts at firms such as Needham, Truist Securities, Canaccord Genuity, Bernstein, and Cantor Fitzgerald.

The earnings per share guidance for GitLab has nearly tripled from the forecast initially provided, and the full-year guidance has increased by $10.5 million.

These financial achievements are accompanied by a significant leadership change with the appointment of Bill Staples as the new CEO, succeeding co-founder and former CEO Sid Sijbrandij. GitLab's forward-looking strategy includes the introduction of new products, anticipated to enhance tier conversions and adoption of the company's offerings.

These recent developments, including strong financial performance and leadership transition, indicate a robust growth trajectory for GitLab. However, these are recent developments and could be subject to change.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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