By Sam Boughedda
A JPMorgan analyst downgraded shares of Gitlab Inc (NASDAQ:GTLB) to Neutral with a price target of $63 per share in a note on Thursday.
The open-source software company was moved to Neutral based on valuation.
However, the analyst explained that the firm does view the stock positively, explaining that they have a fundamental positive bias toward the company and believe that it is favorably positioned in the DevOps space with several tailwinds potentially driving a strong growth glidepath over the near to medium term.
"GitLab shares are currently trading at ~16x EV/CY23 revenue, the second highest valuation across the entire software universe, only below Snowflake. Additionally, GitLab shares trade at an ~16% premium to its comp group (high-growth infrastructure software companies) on an EV/CY23E revenue basis, reflecting its faster growth profile (75% MRQ revenue growth vs. 64% median for the group) although on a much smaller scale, offset by its lack of profitability relative to comps," argued the analyst.
"While we see potential upward bias to our numbers for the out years, we see the current premium valuation as likely already underwriting an upside scenario and it is difficult to see material out-performance in the shares from current levels within the horizon of our price target," the analyst added. "With respect to earnings (reports on 9/6 after-close), while we acknowledge the volatile macro backdrop, we are cautiously optimistic going into the print and expect GitLab to continue to report a good quarter."
GitLab shares plunged 19.5% in Thursday's session following the downgrade.