On Friday, Raymond (NS:RYMD) James updated its outlook on GitLab Inc (NASDAQ:GTLB), increasing the price target to $80 from $70, while keeping an Outperform rating on the stock. The firm's decision follows GitLab's strong third-quarter financial performance and its forecast for fiscal year 2025, which exceeded expectations.
Currently trading at $66.04, GitLab's stock sits within the analysts' target range of $55-$90, though InvestingPro analysis suggests the stock is trading above its Fair Value.
GitLab's recent earnings report has reinforced Raymond James' positive stance, initially established in early 2024. The company has demonstrated impressive performance with revenue growth of 32.42% and industry-leading gross margins of 89.29%. The updated guidance indicates over 30% growth for fiscal year 2025, aligning with the growth metrics associated with high-value software companies. This projection is an increase from the initial guidance of 26% growth. InvestingPro subscribers can access 8 additional key financial insights about GitLab's growth trajectory.
The company's artificial intelligence initiative, known as Duo, is expected to play a significant role in GitLab's valuation, which currently stands at $10.59 billion. Duo is currently reported to account for over 25% of deal value, with a notable 10% quarter-over-quarter increase in seat contribution to Net Revenue Retention (NRR). The firm sees considerable potential in GitLab's AI narrative moving forward.
Additionally, there has been a leadership change at GitLab. Founder and CEO Sid Sijbrandij will move to the role of executive chair on the board. Bill Staples, the former CEO of New Relic (NYSE:NEWR), has been appointed as the new CEO of GitLab. Staples is recognized for leading a turnaround at New Relic, which included margin expansion and a shift to consumption pricing, resulting in more than a 50% increase in New Relic's share value during his tenure.
The transition in leadership is noteworthy as GitLab continues to focus on sustaining growth and improving margins. Raymond James views GitLab as a strategic asset, with a long-term trajectory that could benefit from both its AI developments and the new CEO's previous experience.
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