GitLab Impresses Analysts With Solid Q3 Performance, DevSecOps Growth Opportunity

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  • KeyBanc analyst Michael Turits maintained GitLab Inc GTLB with an Overweight and lowered the price target from $63 to $60.
  • The re-rating followed a solid 7% 3Q23 revenue and a 5% subscription beat
  • GitLab guided 4Q23 revenues in line. GitLab indicated some macro impact on DBNRR (still >130%) with a "slight uptick in contraction" and some increased deal scrutiny. 
  • However, overall sales cycles continued to shorten. 
  • He was impressed by the resilience of GitLab's growth amid widespread tightening of cloud, SaaS, and overall IT spending, with GitLab benefiting from the consolidation of multiple competitive DevSecOps point solutions onto its platform. 
  • The analyst sees GitLab as the leading and broadest independent DevSecOps vendor.
  • RBC Capital analyst Matthew Hedberg reiterated an Outperform and raised the price target from $55 to $60.
  • Despite some macro headwinds, GitLab delivered a strong quarter as he remains impressed with the durability of revenue growth and improved leverage. 
  • The analyst's re-rating reflected bullishness on the DevSecOps opportunity. GTLB remains one of his favorite ideas.
  • Needham analyst Mike Cikos reiterated Buy with a price target of $60.
  • The analyst noted GitLab reported another solid quarter, handily beating estimates and guidance.
  • Shares of GitLab were down 25% on a quarter-to-date basis versus the IGV up 5% due to concerns about weaker macro conditions, Developer spending, and exposure to Start-ups and the Technology vertical. The company's results disproved these fears. 
  • Meanwhile, the company sounded positive after this earnings cycle, noting that sales cycles compressed again. 
  • The analyst believes this demonstrates the company's value proposition and criticality to customers. Preliminary guidance was also upbeat.
  • Price Action: GTLB shares traded higher by 8.51% at $41.59 on the last check Tuesday.
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