GTLB - GitLab: Staying On The Sidelines As Growth Is Fully Priced In
2024-01-22 12:19:05 ET
Summary
- GitLab is a pioneer in the DevSecOps platform, but its stock is trading at a valuation that fully prices in future growth.
- The company has seen strong revenue growth, increasing adoption, and improving profitability.
- However, there are concerns about lengthening sales cycles, increasing competition, and an unattractive valuation.
Introduction and Investment Thesis
GitLab ( GTLB ) is the pioneer of The DevSecOps (a portmanteau of "development," "security," and “operations”) platform that enables its customers to develop, secure, and operate software in a single application. In 2023, the stock performed at par with the Nasdaq 100. While the company delivered revenue growth of 33% in Q3 FY24, driven by a stronger growth rate in its $100K+ customers and deeper adoption of its “Ultimate” pricing tier, as well as improving its overall profitability, I believe that the stock is trading at a valuation where it's future growth is fully priced in. Along with that, I also believe that the company may continue to see dampened effects from longer sales cycles in the SMB space as macroeconomic uncertainties persist as well as rising competitive pressures from larger players such as Microsoft ( MSFT ), Amazon ( AMZN ), and Google ( GOOG ) as they bring their own development tools to the market....
GitLab: Staying On The Sidelines As Growth Is Fully Priced In