Buy GitLab and JFrog, Analyst Says. They Are Poised to Beat Growth Estimates. -- Barrons.com

Dow Jones03-19

Karishma Vanjani

There's demand for tools and platforms that enable faster software development, but there are only two companies that KeyBanc Capital Markets analysts see beating market's growth estimates.

Coverage on GitLab and JFrog stocks was started with a Overweight or Buy equivalent rating by Jason Celino and his team. KeyBanc assigned a SectorWeight or Neutral rating to stocks of other DevOps companies, Atlassian and HashiCorp. These firms enable developers to automate, deploy, and manage code.

"We view DevOps as a critical subsector of software and a mustown category for software investor," Celino wrote late Tuesday.

But "favor stories where we have a higher degree of confidence in 20% [revenue] growth," the analyst added, citing GitLab and JFrog.

GitLab, which simplifies the software development cycle, issued a weak profit forecast for the year earlier this month. Its stock has lost more than a quarter of its value to $55.24 but KeyBanc sees a bounce back to $70. The drivers include Duo Pro, GitLab's artificial-intelligence powered code completion tool.

Celino expects GitLab's revenue to grow 25.9% in the fiscal year ending January versus a 25.7% consensus. Management estimates between 25% to 26.1% of growth.

For JFrog, the analysts cite its product leadership and signs of improving usage. The company, in its earnings last month, said there were 37 customers with annual recurring revenue of more than $1 million in the fourth quarter, nearly doubling from a year ago.

Celino expects a 22.2% growth in revenue for the current year versus consensus of 22%.

KeyBanc has a $52 target for JFrog's stock, implying a 21% upside from Monday's close.

Both GitLab and JFrog were trading flat on Tuesday.

Write to Karishma Vanjani at karishma.vanjani@dowjones.com.

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

March 19, 2024 09:10 ET (13:10 GMT)

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Buy GitLab and JFrog, Analyst Says. They Are Poised to Beat Growth Estimates. -- Barrons.com

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