1. GitLab Inc. (NASDAQ:GTLB)
Number of Hedge Fund Shareholders: 40
GitLab Inc. (NASDAQ:GTLB) is the most popular meme stock on this list among hedge funds, having boasted strong smart money ownership since it went public in the final quarter of 2021. Several of the company’s largest hedge fund shareholders more than doubled the size of their positions in GTLB during Q1, including Mick Hellman’s HMI Capital, Glen Kacher’s Light Street Capital, and Bijan Modanlou, Joseph Bou-Saba, and Jayaveera Kodali’s Alta Park Capital.
AI is popular among retail investors, and GitLab Inc. (NASDAQ:GTLB) is increasingly bolstering its own software development program with AI features. The company grew revenue by 45% in the first quarter and sees little direct competition when it comes to the comprehensive suite of software development tools that it provides. GitLab is still losing money, but has substantial cash reserves to fuel its growth and eventually drive it towards profitability.
The Baron Opportunity Fund is bullish on GitLab Inc. (NASDAQ:GTLB)’s ability to gain market share, as discussed in its Q1 2023 investor letter:
“We increased our position in GitLab Inc. (NASDAQ:GTLB) after a sharp pullback in the stock price following its fourth quarter earnings report. GitLab is a software platform that developers, IT professionals, and security teams use to manage all stages of the software development life cycle. While GitLab’s fourth quarter performance was solid, with 58% revenue growth, management issued disappointing 2023 revenue guidance. New customer growth was healthy, but GitLab saw lower expansion rates in its base product as some existing customers cut back on paid licenses to account for layoffs in their businesses, while others slowed purchasing in anticipation of lower developer hiring this year. Management is assuming this trend will continue through the remainder of 2023. Longer term, we believe GitLab can continue to gain share in the $40 billion software developer market because its ability to address all stages of the software life cycle in a single, unified application give it an advantage over point solutions. Shorter term, we see upside to the guidance as: (1) customers continue to upgrade to GitLab’s higher-priced product tier to add security and compliance features; (2) net new customer growth remains healthy; and (3) GitLab is implementing a price increase that should yield an acceleration in revenues toward the end of 2023 and into 2024. The company also continues to demonstrate solid operating leverage. We believe the price increase will help GitLab achieve profitability sooner than initially projected.”
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