3. Gitlab Inc. (NASDAQ:GTLB)
Market Capitalization as of September 13: $8.69 million
Number of Hedge Fund Holders: 39
Gitlab Inc. (NASDAQ:GTLB) is an open-core company that operates a DevOps software package (under the name of GitLab) that can develop, secure, and operate software. This platform helps software development teams manage the entire development lifecycle, from planning and coding to testing and deployment.
GitLab’s DevSecOps platform is designed to enhance collaboration among developers, security experts, and operations teams, improving software quality and security while reducing delivery times. With the integration of AI, it enables enterprises to achieve results beyond code generation.
GitLab Duo has shown impressive productivity gains, including a 90% reduction in toolchain operation time and 50% faster lead times and vulnerability detection. Notable clients like Barclays and F5 are adopting GitLab Duo, reflecting a growing trend among large enterprises to use AI for improved developer experiences and outcomes.
Gitlab Inc. (NASDAQ:GTLB) was recognized as a Leader in the inaugural 2024 Gartner Magic Quadrant for AI Code Assistants. Additionally, it maintained its Leader status in the 2024 Magic Quadrant for DevOps Platforms for the second consecutive year.
Second quarter revenue rose 30.81% year-over-year to $182.58 million, fueled by new clients like Delaware North and Guild Mortgage, along with growth from existing customers. 39 hedge funds together hold 5,076,668 shares in the company as of Q2 2024. The largest stake amounts to $252,411,933 by HMI Capital.
The company is well-positioned to capitalize on the rising demand for AI in software development, with Gartner predicting that AI adoption in platform engineering teams will soar from 5% to 40% by 2027.
Baron Discovery Fund stated the following regarding GitLab Inc. (NASDAQ:GTLB) in its Q2 2024 investor letter:
“We are huge believers in the practical uses of AI, and we have several investments in companies that adapt AI models to enhance their products and services. These include companies like GitLab Inc. (NASDAQ:GTLB), SentinelOne, Inc., and Couchbase, Inc., which were among our top detractors at one point in the second quarter (GitLab and SentinelOne recovered significantly in the last week of the quarter). As of the second quarter at least, the market has just not been ready to reward AI companies beyond those providing “picks and shovels.” This led to all three of these companies trading at or near all-time low valuation levels during the quarter. Nevertheless, we believe that in the coming quarters the market will broaden its level of interest from AI hardware to “adaptive AI” investments like GitLab, SentinelOne, and Couchbase. In that scenario, all three of these stocks have significant upside potential.
GitLab is a subscription software company that enables enterprise software developers to develop new software applications rapidly and securely for their firms. GitLab uses AI to help with code suggestions, to check for holes in security, and to automate collaboration among the many developers within an enterprise. GitLab recently launched a product called Duo that we believe will provide revenue upside for the company and enhance the competitiveness of their product of offerings. SentinelOne is a cybersecurity company that provides endpoint protection (a much more advanced version of legacy “anti-virus” software) both at customers’ physical sites and in the cloud. It uses AI to detect anomalous behavior on the network and to automate the remediation of the security flaws that led to the intrusion. Both companies are recurring revenue entities, with high gross margins (78% for SentinelOne and 90% for GitLab) and are growing rapidly (revenue growth of 25% or more). Yet both are trading at or near all-time low valuation levels. GitLab shares dropped 14.7% in the quarter despite raising full-year revenue and earnings guidance. This was partly due to a health issue with the CEO (cancer recurrence which he believes is very treatable). We see GitLab revenues growing at a compounded rate of 26% through 2028 with free cash flow growing five-fold over current levels. Again, we see the stock doubling over this time.”
