GitLab shares plummet 37% on guidance miss; analysts say selloff overdone

By Davit Kirakosyan

GitLab Inc (NASDAQ:) shares trade 30% lower in premarket Tuesday following the company’s announced worse-than-expected guidance, while beat the estimates.

Q4 revenue grew 58% year-over-year to $122.9 million, compared to the consensus estimate of $119.59M. The loss per share was $0.03, compared with the consensus estimate for a loss of $0.14.

Customers with more than $5,000 of ARR increased 52% year-over-year to 7,002, while customers with more than $100,000 of ARR increased 42% to 697. Customers with more than $1M of ARR increased to 63, up 62% year-over-year.

The company expects its Q1/24 loss per share in the range of $0.15 to $0.14, compared with the consensus for a loss of $0.16 a share, and revenue in the range of $117M to $118M, compared with the consensus of $126M.

For the full year, the company expects a loss per share of $0.29 to $0.24, compared to the consensus for a loss of $0.52, and revenue of $529M to $533M, compared to the consensus of $586.1M.

Truist analysts lowered the price target to $50 from the prior $65 per share, citing disappointing guidance. However, they believe the market is overreacting.

“The slowing macro has impacted their expansion motion where seat growth is a significant contributor, though we believe the long term fundamentals remain intact. We think shares have overreacted to the news and guidance will prove conservative. We reiterate our Buy rating,” they said in a note.

BofA analysts also cut the price target as they went to $50 from the prior $75 per share on “surprisingly soft” revenue guidance. They believe a soft growth outlook could weigh on shares in the near term.

“We believe the revenue and profitability guidance is conservative, which should lead to beat-and-raises from here, if the macro doesn’t get meaningfully worse. With GTLB trading afterhours at approximately $30, this equates to roughly 6x EV/C24E to our updated revenue forecast of $690mn (+30% y/y), which suggests limited downside. We reiterate our Buy rating.”