GitLab (GTLB) Shares Drop 33% Amid AI Strategy Concerns
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1h ago
0mins
Source: Fool
- Poor Stock Performance: GitLab's shares fell 33% last year due to a combination of slowing revenue growth, high valuation, and declining customer retention, leading investors to adopt a wait-and-see approach regarding its AI strategy, which negatively impacted market confidence.
- Slowing Revenue Growth: Although the company reported a 25% year-over-year revenue increase to $244.4 million in Q3, market expectations for future growth remain pessimistic, particularly with concerns that generative AI may pose a threat rather than an opportunity for the company.
- Significant Valuation Decline: GitLab now trades at a price-to-sales ratio of just 6, a substantial decrease from one or two years ago, indicating market apprehension about its future profitability despite the overall strong performance of tech stocks.
- Increased Competitive Pressure: GitLab faces heightened competition from GitHub, owned by Microsoft, leading investors to question its ability to sustain growth and profitability in the AI era, especially following guidance that fell short of market expectations.
Analyst Views on GTLB
Wall Street analysts forecast GTLB stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for GTLB is 52.61 USD with a low forecast of 40.00 USD and a high forecast of 72.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
25 Analyst Rating
15 Buy
10 Hold
0 Sell
Moderate Buy
Current: 34.140
Low
40.00
Averages
52.61
High
72.00
Current: 34.140
Low
40.00
Averages
52.61
High
72.00
About GTLB
GitLab Inc. provides DevSecOps Platform, is built on a single codebase, unified data model, and user interface. The Company offers customers flexible deployment options, including a self-managed offering, as well as multi-tenant and single-tenant (GitLab Dedicated) software-as-a-service (SaaS) solutions. It offers the DevSecOps Platform in three different subscription tiers, namely Free, Premium and Ultimate. The DevSecOps Platform enables its customers to move their DevOps workflow across any hybrid or multi-cloud environment. Its subscription plans are available as a self-managed offering that customers download to run in their own on-premises environment or hybrid cloud environments, and also a SaaS offering, which is offered as either multi-tenant or single-tenant (called GitLab Dedicated). The Company also provides related training and professional services. Its SaaS products provide access to hosted software as well as support.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
