We came across a bullish thesis on GitLab Inc. (GTLB) on High Growth Investing’s Substack by Stefan Waldhauser. In this article, we will summarize the bulls’ thesis on GTLB. GitLab Inc. (GTLB)’s share was trading at $55.66 as of Dec 19th. GTLB’s trailing and forward P/E was 69.44 according to Yahoo Finance.
A corporate executive standing in front of a large monitor, demonstrating the DevOps package repository.
GitLab (GTLB), a standout from the 2021 IPO cohort, has navigated a turbulent journey in the public markets. Like many high-growth tech companies of its era, GitLab’s debut came at a premium valuation, leading to an inevitable correction as its stock shed nearly 80% of its value during the market downturn of 2022-2023. However, since mid-2024, GitLab has staged an impressive recovery, buoyed by solid financial performance and growing investor confidence.
GitLab provides an all-encompassing platform for software development, catering to the DevOps and DevSecOps ecosystems. This integrated approach streamlines collaboration between development, operations, and security teams, enabling organizations to enhance the efficiency, speed, and quality of their software development cycles. Originating as an open-source project in 2011, GitLab has evolved into a full-fledged enterprise offering under the leadership of co-founder Sid Sijbrandij, who transitioned to Chairman at the end of 2024 due to health reasons. Its seamless blend of version control, issue tracking, continuous deployment, and compliance tools positions GitLab as a premier DevSecOps solution, differentiating it from competitors like GitHub and Bitbucket.
GitLab’s commitment to innovation and automation, underpinned by AI and machine learning capabilities, has established it as a leader in a growing market projected to reach $40 billion. Its land-and-expand strategy has been remarkably effective, reflected in a net retention rate of 124%. With over 30 million registered users and a robust enterprise customer base—including over 1,100 organizations paying annual fees exceeding $100,000—GitLab continues to expand its footprint in the software development sector. This dynamic customer base underscores the platform’s significance to large enterprises, many of which have committed to multi-year contracts as evidenced by GitLab’s $812 million in remaining performance obligations (RPOs).
The company’s financial results for Q3 FY25 showcased its resilience and growth trajectory. Revenue rose 31% year-over-year to $196 million, while RPOs surged 48%, signaling strong long-term commitments from customers. With 70% of FY25 revenue already locked in and the potential for significant upselling, GitLab’s growth slowdown appears to be temporary. Its exceptional gross margin of 89% highlights its scalability and profitability potential. Over the past two years, GitLab has dramatically improved operational efficiency, with marketing and sales expenses dropping from 60% to 40% of revenue and administrative costs falling from 20% to 14%. Consequently, the non-GAAP operating margin expanded by 1,000 basis points to 13% in Q3 FY25.
GitLab achieved free cash flow breakeven a year ahead of schedule in FY24 and has since demonstrated a robust cash flow profile, despite minor fluctuations in recent quarters. These results underscore its ability to transition from a high-growth company to a cash-generative enterprise as it scales further. With a total addressable market still in its early stages of penetration, GitLab is well-positioned to capitalize on the growing demand for unified DevSecOps platforms.
In summary, GitLab represents a compelling investment opportunity with strong fundamentals, a dominant market position, and a clear path to sustained growth. Its recent operational improvements and financial discipline have set the stage for significant value creation, making it an attractive addition to any growth-focused portfolio.
GitLab Inc. (GTLB) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 43 hedge fund portfolios held GTLB at the end of the third quarter which was 39 in the previous quarter. While we acknowledge the risk and potential of GTLB as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GTLB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.