About GITLAB
$GitLab, Inc.(GTLB)$ GITLAB is a software development company that provides a platform for developers to collaborate on code and create, test, and deploy their applications. The company operates in a highly competitive space, with popular competitors like GitHub and Atlassian's Bitbucket. However, GITLAB has differentiated itself by providing a complete DevOps platform that enables seamless integration of development, operations, and security.
GITLAB vs GITHUB
GITLAB's main competitor, GitHub, was acquired by Microsoft in 2018 for $7.5 billion. Since then, GITLAB has been gaining ground, and some experts believe it is now the preferred platform for enterprise customers. According to Goldman Sachs, GITLAB's total addressable market is estimated to be around $20 billion, with significant opportunities for growth.
Artificial Intelligence with GITLAB?
One area where GITLAB is exploring new opportunities is artificial intelligence. The company recently acquired UnReview, an AI-powered code review tool, to help developers catch errors and improve code quality. This acquisition is part of GITLAB's broader strategy to integrate AI and machine learning into its platform to make it more efficient and effective.
Past stock performance following earnings
Over the past four quarters, GITLAB has consistently beat EPS estimates and revenue estimates, leading to a spike in the stock price after earnings. The charts below plotted with QQQ shows a clear trend of GTLB's earnings reports influencing its stock price. However, the stock has tended to trend with the broader market after the initial surge. GITLAB's stock performance has been highly volatile around earnings announcements, making it a potentially lucrative but also risky trade.
After Q3 2023 earnings
After Q2 2023 earnings
After Q1 2023 earnings
After Q4 2022 earnings
Volatility ahead of CPI tomorrow.
The market is expected to be volatile as authorities stepped in to restore investor confidence after the collapse of Silicon Valley Bank (SVB). While there is no major economic news scheduled for the day of the earnings announcement, the Consumer Price Index (CPI) is due to be released the tomorrow premarket at 830am. This could impact the broader market and potentially offset any positive momentum from GITLAB's earnings if the CPI comes in higher than expected.
So how to trade?
Based on the past performance of GITLAB's stock around earnings and the potential impact of the CPI release, one potential trade strategy could be to buy a call option at a strike price of 35 expiring on 21 Apr 2023 $GTLB%2020230421%2035.0%20CALL$ $GTLB 20230421 35.0 CALL$ . The support level for GITLAB's stock is around 34 (see chart below), and it dropped 6.36% on the Friday before earnings, closing at 44.35. If the stock rallies after earnings, as it has in the past, there could be high volatility that drives up the option price.
GTLB support level
However, given the potential for negative economic impacts from the CPI release and continued negative market sentiment from SVB and Silvergate collapse, it may be wise to take some profit at market opening where available. As the Relative Strength Index of the NASDAQ is quite low at below 40, it may be worth holding onto some option for a while to see if the price will increase when the broader market recovers.
Conclusion
Overall, trading GITLAB's earnings is a risky but potentially rewarding opportunity for short term traders who are willing to navigate volatility and closely monitor the market. Investors with a long-term horizon may want to consider holding onto GTLB for its potential upside. GitLab has a 1 year price target of 64.92 with the company's strong fundamentals and growth prospects. GitLab's unique value proposition, which combines software development, operations, and security in one platform, has allowed it to capture a significant share of the DevOps market. With the growing trend of digital transformation and increasing demand for DevOps solutions, GitLab is well-positioned to continue its growth trajectory.
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