What Happened?
Shares of devSecOps platform provider GitLab (NASDAQ: GTLB) fell 3.3% in the afternoon session after Wells Fargo initiated coverage on the stock with a neutral 'Equal Weight' rating. The bank set a price target of $50 per share. According to the firm, the cautious stance stems from a challenging near-term outlook as GitLab implements a new go-to-market sales strategy while facing tougher year-over-year pricing comparisons. Wells Fargo also cited investor uncertainty regarding GitLab's guidance for the upcoming year as a factor. While acknowledging the company's impressive profit margins and revenue growth, the analyst prefers to wait for a better entry point as new leadership establishes itself and the competitive landscape evolves.
The shares closed the day at $44.11, down 2.2% from previous close.
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What Is The Market Telling Us
GitLab’s shares are extremely volatile and have had 33 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 27 days ago when the stock dropped 9.7% on the news that the company's disappointing revenue forecast for the upcoming quarter overshadowed its otherwise strong second-quarter results. The DevSecOps platform provider beat analyst expectations for its second quarter, with revenue growing 29.2% year-over-year to $236 million and adjusted earnings per share of $0.24 also coming in ahead of consensus. However, investors focused on the company's financial outlook, which fell short. GitLab's third-quarter revenue guidance of around $238.5 million came in below Wall Street's estimates. This forecast suggests a significant slowdown in growth compared to previous periods, raising concerns about the company's future momentum. While management did raise its full-year profit forecast, the weak revenue guidance was the primary driver of the negative market reaction.
GitLab is down 21.7% since the beginning of the year, and at $44.11 per share, it is trading 39.7% below its 52-week high of $73.14 from February 2025. Investors who bought $1,000 worth of GitLab’s shares at the IPO in October 2021 would now be looking at an investment worth $424.58.
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