Gitlab Scores Well On BofA's 4Ms Framework For Software Investing

Gitlab Inc GTLB “screens very well” in the four Ms for software investing: market, competitive moat, margin potential and management strength, according to BofA Securities.

The Gitlab Analyst: Koji Ikeda initiated coverage of Gitlab with a Buy rating and a price target of $140.

The Gitlab Thesis: The market being addressed by the company is expected to reach $52 billion by 2025, Ikeda said in the initiation note.

The market is also underpenetrated, which creates “a long-tail growth opportunity for the business,” he added.

Gitlab has a solid competitive moat, given its strong positioning in source code management, an end-to-end DevOps platform, more than 150% net revenue retention, its strategic partner channel, and DevOps becoming “an attractive category,” the analyst mentioned.

“Longer-term, management sees the business driving 20%+ operating margins and 25%+ free cash flow margins,” Ikeda said. “We believe management is viewed as visionary by the end-market, and has the potential to build a reputation as solid operators as a public company,” he added.

GTLB Price Action: Shares of Gitlab rose by 5.10% to $129.84 Monday morning at publication.