GitLab
stock surged Tuesday after posting its first ever adjusted operating profit. However, a rival software-development company could offer a better way to play growing demand in the sector according to analysts at D.A. Davidson.
GitLab
shares were up 16% in premarket trading on Tuesday at $61.46, after reporting fiscal third-quarter earnings ahead of analysts’ expectations late Monday. The company said its GitLab Duo suite of artificial-intelligence capabilities was making software engineers more productive.
D.A. Davidson analyst Gil Luria raised his target price on GitLab stock to $60 from $50. However, he kept a Neutral rating on the stock, arguing its valuation appears stretched after GitLab executives told analysts on an earnings call that midmarket and smaller business customers were being cautious in an uncertain macroeconomic environment.
“Overall, the demand environment seems to be stabilizing for GitLab but hearing of elongated sales cycles still brings us pause, especially considering the monetization of GitLab Duo is a key catalyst for the company,” Luria wrote.
Luria said he prefers GitLab’s fellow software-development tools company
JFrog
at the current valuations.
JFrog
stock was up 0.6% in after-hours trading on Monday and has risen 32% this year so far having recently topped expectations for its own third quarter.
“[JFrog] should benefit from more code being written as a result of new tools like GitLab’s Code Suggestions that improve developer productivity,” Luria wrote.
GitLab reported a fiscal third-quarter net loss of $1.84 a share but adjusted earnings were 9 cents a share. Revenue rose 32% to $149.7 million from the same period a year earlier. Analysts had expected an adjusted loss of 1 cent a share on revenue of $141.5 million, according to a FactSet poll.
GitLab said for its fourth quarter it expects revenue of $157 million-$158 million and an adjusted profit of between 8 and 9 cents a share.
Write to Adam Clark at [email protected]
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