Yahoo Finance GitLab (GTLB) Stock Trades Up, Here Is Why
What Happened:
Shares of software development tools maker GitLab (NASDAQ:GTLB) jumped 16% in the pre-market session after Reuters reported the company is exploring a sale. According to the report, Gitlab is working with investment bankers on a potential sale after attracting acquisition interest from peers, including Datadog. It is worth highlighting that Alphabet (Google) has a 22.2% voting stake in GitLab and is also considered a potential buyer.
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What is the market telling us:
GitLab's shares are very volatile and over the last year have had 24 moves greater than 5%. But moves this big are very rare even for GitLab and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 4 months ago, when the stock dropped 25.1% on the news that the company reported fourth-quarter results and provided full-year revenue guidance below expectations. In addition, its full-year EPS guidance significantly missed, coming in 43% below analysts' forecasts.
On the other hand, GitLab beat Wall Street's revenue estimates, driven by a better-than-expected net revenue retention rate (130% vs estimates of 127%). Furthermore, its number of customers with more than $100k in ARR significantly outperformed (955 vs estimates of 859). During the quarter, GitLab appointed Sabrina Farmer as its Chief Technology Officer. Farmer joined the company from Google, where she was VP of Engineering. Overall, the results could have been better. Software names have been showing weaker 2024 guidance across the board this quarter, and GitLab was not spared.
Following the results, Wall Street analysts largely maintained their sentiment toward Gitlab. Mizuho analyst Gregg Moskowitz lowered the price target on the stock from $87 to $75, adding, "We share investors' disappointment and surprise regarding the guidance...Nevertheless, we believe GTLB is oversold, and we remain confident in its ability to grow due to AI monetization, our view that management's estimate of a $10M-$20M FY25E revenue impact from pricing is conservative, and our research that indicates healthy upsell potential."
GitLab is down 10% since the beginning of the year, and at $53.92 per share it is trading 30.5% below its 52-week high of $77.60 from February 2024. Investors who bought $1,000 worth of GitLab's shares at the IPO in October 2021 would now be looking at an investment worth $519.98.
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