GitLab Inc (NASDAQ: GTLB) shares have been making a strong comeback in recent weeks after what must be acknowledged as a challenging year. Despite beginning 2024 on a high, driven by momentum from the 2023 year-end rally, the tech stock slumped into the summer. 

However, since then, the $9 billion San Francisco-based company has been rebounding sharply, with shares up more than 35% since August. As we head into the last couple of weeks of the year, there are several reasons to think this rally has legs, and investors should be getting excited. Let's jump in and take a look at why GitLab is worth watching closely.

GitLab's Strong Fundamental Performance

GitLab's recent performance is underpinned by solid fundamental performance, as seen in last month's earnings report. The company smashed analyst expectations, landing its highest-ever quarterly revenue print at $182 million while delivering a 51% beat on the consensus for its EPS. As earnings reports go, it doesn't get a whole lot better than that, and management wasn't afraid to say they expect that trend to continue. 

As CFO Brian Robins said at the time, "We delivered another quarter of better than 30% top-line growth and significant year-over-year operating margin expansion. As we enter the second half of fiscal year 2025, I'm confident in our ability to continue to exceed customer expectations". 

GitLab's continued growth in revenue and margins strengthens its position ahead of the next earnings report in December. The ongoing rally suggests investors are already preparing for another potential upside surprise, and the momentum is clearly bullish. 

Bullish Updates Drive GitLab’s Recent Bounce

Beyond the fundamental performance, several bullish updates from analysts in the past couple of weeks have also contributed to GitLab's bounce.

Earlier this month, Morgan Stanley initiated coverage of the stock with a bullish Overweight rating. The team there believes GitLab is well-positioned to become a consolidator in the fragmented market as more businesses seek platform-based solutions rather than using multiple specialized tools.

This followed similarly bullish stances from the teams at UBS Group, Wells Fargo, and TD Cowen in September. This week has already seen another voice join the bull camp, with Needham & Company upgrading their rating on GitLab from Hold to Buy. It's worth noting their new price target of $70—from where the stock was trading on Monday afternoon—which is pointing to a nearly 30% targeted upside.

Like its peers, the Needham team is particularly optimistic about GitLab's potential to capitalize on the growing demand for DevOps solutions, especially as AI and automation continue to transform the industry.

Concerns Worth Noting

All that being said, there are risks and concerns to consider. Amidst all the bullish analyst updates, last week saw DA Davidson maintaining their Neutral rating on GitLab stock, signaling some caution among its revenue growth prospects. Additionally, concerns have been raised over the stock's valuation after the recent rally, suggesting it might be vulnerable to pullbacks in the near term.

While the company's growth prospects are solid, competition in the DevOps space is fierce. GitLab needs to stay ahead of its peers to maintain its upward trajectory, and any missteps could impact investor confidence.

GitLab's Golden Entry Opportunity

While valid, it has to be said that there are a lot more reasons to be excited about GitLab right now than not. Take the stock's technical indicators, for example, which also support the bull's argument. GitLab's relative strength index (RSI) is currently at 62, signaling strong ongoing momentum without being in overbought territory. The RSI measures the speed and change of price movements from recent sessions, with readings under 30 suggesting the stock is extremely oversold and readings above 70 suggesting the opposite. 

The technical setup, combined with high expectations from the analysts, strong fundamental performance, and a favorable interest rate environment, suggests that GitLab's rally could continue through the end of the year. At the very least, it's a stock worth watching closely, with any near-term pullback likely to be a golden entry opportunity.