GTLB - GitLab receive Neutral rating from JPMorgan on stretched valuations

September, 01 2022 01:48 PM GitLab Inc.

GitLab ( NASDAQ: GTLB ) shares slid sharply on Thursday after the JPMorgan made a comeback on the DevOps software company at the Neutral rating.
Analyst Pinjalim Bora voiced stretched valuations as the reason for shifting away from bank's bullish stance on Gitlab. Bora said "the stock currently trades at ~16x EV/CY23 revenue, the second highest valuation across the entire software universe, only below Snowflake ( SNOW )."
"Additionally, GitLab shares trade at an ~16% premium to its comp group of high-growth infrastructure software companies.... we see the current premium valuation as likely already underwriting an upside scenario and it is difficult to see material out-performance," he added.
To balance, the bank presented a fundamental positive bias toward the company. Bora noted, "the strong subscription-based product portfolio has allowed the company to drive rapid growth at scale over the last several years, while maintaining best-in-class gross retention and >130% net retention rate."
With this neutral rating, JPMorgan has assigned a $63 price target to GTLB stock for Dec. 2023. It implies roughly a 5% upside on the stock's last close.
But GitLab shares have fallen to the lowest levels seen in the past 2 months on Thursday, down 19% to trade at $48.55 at the current pixel time. GTLB stock has lost 42% since its listing.
In January, J.P. Morgan called GitLabs ( GTLB ) a "growth All-Star," noting that software demand fundamentals are strong.

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