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Investing.com - GitLab Inc (NASDAQ:GTLB) shares surged approximately 10% following speculation that Datadog is exploring a potential takeover bid, according to a report from StreetInsider. The stock has already gained 8.2% over the past week, with a current market capitalization of $8.05 billion. Datadog (NASDAQ:DDOG) stock declined mid-single digits following the news.InvestingPro data shows GitLab maintains impressive gross profit margins of 88.52% and strong financial health with a current ratio of 2.6, indicating robust operational efficiency.
Raymond James maintained its Outperform rating and $55.00 price target on GitLab amid the takeover rumors. The firm noted that while it remains skeptical about the source of the speculation, such a deal "has long made sense" at the right price. This aligns with broader analyst sentiment, as InvestingPro reveals 19 analysts have recently revised their earnings expectations upward for the upcoming period.
The speculated acquisition price of $60+ would value GitLab at an enterprise value of approximately $10 billion, representing 9-10x FY27 EV/Revenue. This potential valuation would represent more than 40% upside from pre-news levels, exceeding the typical 30% premium seen in comparable recent transactions. GitLab’s revenue growth remains strong at 29% year-over-year, supporting its premium valuation metrics.
Datadog currently holds nearly $4 billion in cash and equivalents (approximately $2.9 billion net cash), though Raymond James analysts anticipate any potential deal would likely involve equity issuance. This approach could be logical given Datadog trades at roughly 13x EV/Revenue.
Neither GitLab nor Datadog has issued official comments regarding the takeover speculation. Raymond James had previously identified GitLab as a potential strategic acquisition target, noting in recent research that the company represents "an inexpensive stock relative to the growth profiles that can attract potential suitors."
In other recent news, GitLab Inc reported a 29% year-over-year revenue growth in its fiscal second quarter, surpassing consensus estimates by 4%. However, FBN Securities lowered its price target for the company to $65.00 from $75.00 due to mixed results, although it maintained an Outperform rating. The company’s remaining performance obligations reached $988.2 million, marking a 32% increase year-over-year, which did not meet FBN’s expected 37% growth. Additionally, GitLab has made changes to its executive team, appointing James Shen as interim CFO and Simon Mundy as chief accounting officer. Wells Fargo initiated coverage of GitLab with an Equal Weight rating, citing a challenging near-term outlook due to a new sales strategy and tougher pricing comparisons. RBC Capital reiterated its Outperform rating with a $58.00 price target after gaining insights into GitLab’s management changes and product offerings. There is also speculation, unconfirmed by either party, that Datadog may be considering a takeover bid for GitLab.
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