To The Moon

$GitLab, Inc.(GTLB)$ is scheduled to report their second quarter results on 03 September 2024 for the period ending 31 July 2024.

Market is expecting GitLab to show a rise in the quarterly revenue with a 26.7% increase in revenue to $176.889 million from $139.58 million a year ago,

The company's guidance on 03 June 2024, for the period ended 31 July, was for revenue between $176.00 million and $177.00 million.

The consensus EPS estimate is expected at 10 cents per share. This is within the EPS guidance on 03 June 2024, for the period ended July 31, which was between $0.09 and $0.10

Leader In Gartner 2024 Magic Quadrant for AI Code Assistants

GitLab’s total addressable market is estimated to be $40 billion. It has been winning accolades due to a robust pipeline. Gartner, in its 2024 Magic Quadrant for AI Code Assistants, put GitLab in the Leader quadrant.GitLab is leveraging AI to boost the potency of its portfolio. It has introduced AI throughout the entire software development cycle that improves productivity and security without sacrificing speed.

AI code assistants go beyond just code generation and completion. They are collaborative partners that boost developer efficiency by improving code quality and continuous learning. By automating routine tasks and providing intelligent suggestions, assistants like GitLab Duo — our suite of AI-powered features — free up developer time to focus on higher-level problem-solving.

Customers are fast adopting its AI offerings Gitlab Duo and GitLab Duo Pro. The company recently strengthened its portfolio with the launch of the GitLab Duo Enterprise add-on, which is charged at $39 per user per month for Ultimate customers. Ultimate accounted for 46% of GitLab’s total Annual Run Rate.GitLab’s prospects ride on an expanding clientele, driven by the strong adoption of its DevSecOps platform. Its strong partner base, which includes cloud service platforms like Alphabet GOOGL and Amazon AMZN, is helping the company rapidly expand its footprint among large enterprise customers.

Why GitLab Is Set For Future Growth?

Annual Recurring Revenue (ARR), a key performance metric, reflects the total annualized value of recurring subscription contracts as of the end of the period. GitLab’s ARR has shown significant growth with a 39% 2-year CAGR, growing to US$677m, which is crucial as it provides a stable and predictable revenue stream. A contributing factor to this is the expanding customer base, which has substantially grown from 5,168 customers in Q1 FY2023 to 8,976 in Q1 FY2025. Among these customers, the percentage of customers generating more than US$100k ARR has also grown from 10.5% (545) to 11.4% (1,025).

Another key performance metric would be the Dollar-Based Net Retention Rate (DBNRR), which measures the percentage of change in ARR from existing customers over a 12-month period. GitLab reported a DBNRR of 129% for Q1 FY2025. A DBNRR above 100% indicates that existing customers are not only renewing their subscriptions but also increasing their spending, either by upgrading to higher-tier plans or adding more users. This metric highlights the company’s ability to expand within its existing customer base, a positive sign of customer satisfaction and the value it derives from GitLab’s platform.

I am expecting this growth to indicate that GitLab has the potential for continuous future growth as the AI revolution now moved into AI tools where demand will be growing significantly higher.

GitLab (GTLB) Year-To-Date Returns

With more than 20% drop in its stock price, we can understand why investors might be avoiding this stock, GitLab still are facing macroeconomic challenges, but if we looked for long term for this stock, I would think that there is potential for GitLab to go back to its previous highs.

I will be monitoring the price action and prepare to take a position when trading resume on 03 Sep,

GitLab (GTLB) Price Target Forecast

Based on 20 Wall Street analysts offering 12 month price targets for Gitlab in the last 3 months. The average price target is $62.69 with a high forecast of $80.00 and a low forecast of $50.00. The average price target represents a 32.26% change from the last price of $47.40.

Based on GitLab ARR and DBNRR growth, I would think that this stock can be reaching near $60 if the earnings turned out to show significant improvement. I am expecting GitLab to provide a better EPS as well.

GitLab (GTLB) Technical (MACD and KDJ)

If we looked at the technical, we can see that MACD is showing upside potential whereas investors cautious on this stock has caused the KDJ to show a downward trend, but if we were to look at the long term potential, I believe we could see GitLab ARR improving significantly.

This might bore well for the stock price. I will be seriously looking at this stock to take a position on 03 Seo 2024.

Summary

I think GitLab current stock price is at quite a good value to take a position considering that there is potential of higher ARR and also their cash flow is also pretty positive.

This stock can be considered for a long term position. I am expecting a significant improvement in its Dollar-Based Net Retention Rate (DBNRR).

Appreciate if you could share your thoughts in the comment section whether you think GItLab can be considered for a long term stock to hold?

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.