GitLab surges 20% on better-than-feared results, analysts positive

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By Senad Karaahmetovic 

Shares of GitLab Inc. (NASDAQ:GTLB) are trading about 20% higher in pre-market Tuesday after the company reported better-than-feared results for its third quarter.

GitLab posted a loss per share of $0.10 on revenue of $113 million, topping the average analyst consensus for earnings of -$0.15 per share on revenue of $106.04M. Customers with more than $5,000 of annual recurring revenue (ARR) grew 59% year-over-year to 6,469. Customers with more than $100,000 of ARR grew 49% year-over-year to 638.

"Our Q3 business results demonstrate GitLab's value proposition as a mission critical DevSecOps platform for software innovation is resonating," said Sid Sijbrandij, GitLab CEO and Co-Founder.

For this quarter, the company expects a loss per share to range between $0.15 and $0.14 on revenue of $119-120M, which compares to the consensus of a loss per share of $0.17 on sales of $119.28M.

For FY2023, GitLab sees a loss of $0.56-0.55 per share, much better than the consensus for a loss per share of $0.65. Revenue is seen in the range of $420.5-421.5M, again higher than the $413.71M consensus.

Goldman Sachs analysts said the strong results showed "the durability of developer workflows" with GTLB showing "steady progress toward + OM/FCF generation." They upgraded GTLB stock a couple of months ago and this time reiterated a Buy rating and a $75 per share price target.

"While macro hurdles may become more pronounced, we reaffirm our belief that GTLB is well positioned to see a steadier demand backdrop relative to peers, which we think will be evident when providing initial F24 guidance next quarter. Coupled with significant OM improvement (with F3Q23 non-GAAP operating margin of 19% and EPS of -$0.10 coming in 600bps and 5 cents above expectations, respectively), we expect to see balanced top-line/profitability growth," the analysts said in a client note.

Truist analysts reiterated a Buy rating and a $95 per share price target on GTLB shares as the company's results continue to be in "contrast with their peers' description of a deteriorating macro backdrop."

"Given the early stages of their growth opportunity and buyer preferences trending towards a platform approach to DevSecOps, we believe that the company is in a position where the market is still coming to them despite economic uncertainty. The strong performance in the quarter as well as pipeline visibility gave the company enough confidence to project 40%+ growth for FY24, ahead of our expectations, and an FCF profitability target for FY25," the analysts wrote.