Shares of DevOps platform provider GitLab Inc. (GTLB) posted a better-than-expected first-quarter performance on both its top-line and bottom-line. Its shares are up nearly 10% during pre-market trading following the result.
Revenue increased 75.1% year-over-year to $87.41 million, exceeding estimates by $9.28 million. The net loss per share at $0.18 came in narrower than consensus by $0.09. The growth in the top line was attributed to gains across subscription and license verticals. Most importantly, the dollar-based net retention rate was above 130% during this period.
Management Weighs In
Sid Sijbrandij, the CEO and Co-Founder of GitLab, commented, “While accelerating revenue growth, we were also able to show significant operating leverage. Underpinning this acceleration in growth was a higher velocity of new customer wins, as well as seat expansion and tier upgrades of existing customers.”
Furthermore, during this period, the company saw an improvement of 1,700 basis points in its operating margin. Similarly, the number of customers with over $5,000 annual recurring revenue (ARR) increased by 64% to 5,168; and the number of customers with over $100,000 ARR increased by 68% to 545 in Q1.
Looking ahead, for fiscal 2023, GitLab expects revenue to be in the range of $398 million to $402 million. Non-GAAP net loss is estimated to be between $130.5 million and $127.5 million.
Analyst’s Take
Reacting to the Q1 performance, Piper Sandler analyst Rob Owens reiterated a Buy rating on the stock but decreased the price target to $60 from $75.
Owens noted the robust Q1 showing, which was marked by revenue acceleration and an earnings beat, but cited compression in multiples for the lowered price target.
Nonetheless, the Street has a Strong Buy consensus rating on the stock based on eight Buys and a Hold. At the time of writing, the average GitLab price target was $70.89, which implies a potential upside of 77.94% for the stock. That’s after a 50.5% slide in share prices so far in 2022.
Closing Note
Shares of the company have trended lower since its listing in October 2021. The robust Q1 showing, coupled with expected double-digit gains in the share price, should shore up investor sentiment in the stock.
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