HomeTrading TipsJPMorgan rates GitLab as Neutral despite its high values

JPMorgan rates GitLab as Neutral despite its high values

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Shares of GitLab (NASDAQ:GTLB) fell precipitously on Thursday after JPMorgan upgraded its rating of the DevOps software provider to Neutral.

Stretched valuations, according to analyst Pinjalim Bora, are the reason the bank has changed its optimistic attitude on Gitlab. The stock presently trades at 16x EV/CY23 revenue, the second highest value in the whole software industry, just behind Snowflake (SNOW), according to Bora.

According to the analyst, GitLab shares also trade at a 16% premium to a group of comparable high-growth infrastructure software businesses. “We regard the current premium valuation as likely already underwriting an upside scenario, and it is difficult to envision meaningful out-performance,” he continued.

The bank displayed a fundamentally favorable bias toward the company in providing a balance. According to Bora, “during the last several years, the company has been able to generate rapid expansion at scale while maintaining best-in-class gross retention and a >130% net retention rate.”

JPMorgan has given the GTLB stock a neutral rating and a $63 price target for December 2023. It suggests a roughly 5% increase over the stock’s most recent finish.

However, on Thursday, GitLab shares dropped to their lowest levels in the previous two months, down 19% to trade at $48.55 at this moment in pixel time. Since it was listed, GTLB stock has decreased by 42%.

J.P. Morgan dubbed GitLabs (GTLB) a “growth All-Star” in January, citing solid fundamentals in software demand.

Gitlab performance

On Monday, June 6th, GitLab (NASDAQ:GTLB) released its most recent earnings report. Earnings per share (EPS) for the quarter came in at $0.30, exceeding the consensus expectation of $0.35 by $0.05. In contrast to the consensus forecast of $78.13 million, the company’s sales for the quarter were $87.40 million. Revenues increased by 75.2% last year. Collectively, equity research analysts forecast that GitLab will report -1.38 earnings per share in the current fiscal year.  

Featured Image – DepositPhoto © SergeyNivens

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