Bull of the Day: GitLab (GTLB)

GitLab (GTLB) is the $8.5 billion pioneer of a leading DevOps platform serving the various needs of software developers, operations, and security teams. Their code hosting and collaboration platform services offer continuous integration, source code management, out-of-the-box pipelines, agile development, and value stream management.The company's focus is to enable faster development and iteration of software, in a more secure manner from the inception of code generation to client deployment.With all the talk of AI about to replace developers as software writes itself, you wouldn't know it looking at the growth of GitLab. The open core platform is on pace to hit nearly $750 million in sales this fiscal year (ends January), representing 28% growth. Plus, analysts are already projecting a 24% top line advance for next year to eclipse $900 million.And driving the push to the upper realms of the Zacks Rank, EPS estimates have recently jumped after their Q2 "beat-and-raise" report delivered Sep 3. This year's consensus surged 28% in the past month from $0.36 to $0.46, representing 130% annual growth.Of course, next year's EPS target got a boost as well with a 20% bump from $0.49 to $0.59.Part of the generous bump to this year's EPS haul must be attributed to the Q2 beat. GitLab delivered $0.15 vs expectations of $0.10, for a 50% earnings surprise. But it's clear that analysts like the growth outlook with new products and increasing enterprise penetration.  Gitlab posted revenues of $182.58 million for the quarter ended July 2024, surpassing the Zacks Consensus Estimate by 3.42%. This compares to year-ago revenues of $139.58 million. The company has topped consensus revenue estimates four times over the last four quarters.Analyst ReactionsIn addition to raising GitLab's growth estimates for the next several quarters, general optimism about the company's niche is encouraging.Truist put out a note right after earnings citing "We believe that the company is executing on their opportunity to offer enterprises a platform solution for DevOps, in what has been a highly fragmented market to this point. The company also highlighted promising wins with newer offerings, showcasing their ability to leverage their enterprise foothold into extended sales opportunities."The Truist team led by Joel Fishbein increased their estimates "on incremental optimism" and reiterate their Buy rating and $80 price target for GTLB shares. I thought their general investment thesis and comments on the duration of GitLab's market opportunity to be especially encouraging as well considering the rapid adoption of AI software development tools...With global enterprises accelerating their digital transformation efforts and adoption of DevOps practices, we believe that GitLab is in a position to benefit from a long tail of durable growth. We believe that shares are relatively attractive to other names in infrastructure software when considering the longevity of the opportunity ahead of them and the compounding growth in their recurring revenue model.The Truist view inspired me to see what other analysts were missing. I found a couple playing catch-up.Morgan Stanley: GTLB is "Next Enterprise Platform Story"On October 9, MS analyst Sanjit Singh initiated coverage of GTLB with an Overweight rating and $70 price target, describing the company as poised to become the next "enterprise platform story in software" as a "key consolidator" in the fragmented and fast-growing software delivery market.Customers are expected to take the platform approach to software development amid "tougher IT budgets, growing integration cost and lost productivity from switching between multiple apps," the Morgan Stanley analyst wrote."With a platform that addresses all workflows involved in releasing and securing software and having already secured market-leading positions" in source code management and continuous integration and delivery, GitLab is poised to emerge as a 'strategic platform' in the market for software development and IT operations."Singh concluded that GitLab's core business may generate a compound annual growth rate of 17% over the next four years to as much as $24 billion in 2027.Needham: Ultimate for Enterprise Offers Richer GrowthNeedham analyst Mike Cikos put out a note this week upgrading the stock from Hold to Buy with a $70 PT. He focused on GitLab's expanded enterprise product offerings, with the Ultimate level gaining traction due to innovations like Duo Pro Enterprise and Dedicated. Despite his late entry to the bull camp, Cikos offered a diversity of interesting data points to understand the company and the business.Cikos highlighted recent data from GitLab that shows seven out of the company’s top 10 deals in the second quarter of fiscal 2025 were for Ultimate, and 65% of new dollars from $100,000-plus customers came from this tier. Innovations like Dedicated and Duo Pro, exclusive to Ultimate, further enhance its appeal.Cikos also gave a good frame of reference for GitLab's opportunity in the face of big competition from Microsoft’s (MSFT) GitHub. He thinks that GitLab’s focus on security and compliance gives it an edge as a neutral vendor not competing with clients in any respect.Cikos expects increased adoption of Ultimate compared to their Premium service, driven by stronger Enterprise sales and GitLab’s compliance and security features, which are crucial for large organizations. This will expand margins. And as another bright horizon, the analyst anticipates that GitLab will continue growing its public sector presence, aided by its recent product launches and federal security certifications.Bottom line: GTLB looks like a good enterprise software play here as it climbs out of a 7 month base.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.7% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report GitLab Inc. (GTLB): Free Stock Analysis Report Microsoft Corporation (MSFT): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks