GTLB - GitLab rises as Needham starts coverage sees 23% upside

GitLab ( NASDAQ: GTLB ) shares rose on Thursday after investment firm Needham started coverage on the DevOps software company, noting it is "increasingly becoming the center of gravity for organizations' software innovation."

Analyst Mike Cikos started GitLab ( GTLB ) with a buy rating and a $70 price target, noting that the company's DevOps platform is benefiting its development strategy.

Ciko also pointed out that GitLab's ( GTLB ) $40B total addressable market is Greenfield and competes against do-it-yourself tools and the company's nearest competitor, Microsoft's ( MSFT ) GitHub, is in less than 20% of deals where GitLab ( GTLB ) competes.

"We view rapid innovation and the frictionless go-to-market as two pillars that can sustain GitLab's growth in an under-penetrated market," Cikos wrote in a note to clients.

GitLab ( GTLB ) shares rose more than 2% to $57.23 in premarket trading.

Last month, GitLab ( GTLB ) surpassed first-quarter estimates, as its retention rate soared to 130%.

Quarterly sales came in at $87.4M, up 75% year-over-year, while it lost an adjusted 18 cents per share. Its GAAP operating margin was -49%, but it lowered its adjusted operating margin to -28%.

Looking ahead, GitLab ( GTLB ) said it expects second-quarter revenue to be between $93.5M and $94.5M, compared to estimates of $94.13M. For the full-year, GitLab ( GTLB ) expects revenue to be between $398M and $402M, losing between 93 cents and 89 cents per share on an adjusted basis.

In June, investment firm Scotiabank started coverage on GitLab ( GTLB ) and several other software companies with a rating of sector outperform, even though the firm sees "tougher sledding" in the near term for the sector .

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