Yesterday, August 28, BofA reiterated its "buy" rating and target price on the small-/mid-cap software development platform GitLab ahead of its quarterly results. The bank said the company is positioned for a “steady string of strong results over time” and that investors should not “sleep on this one.”

Details

Investors should pay attention to GitLab ahead of its quarterly financials, BofA said in a note cited by CNBC. The company is scheduled to release results on the evening of Wednesday, September 3.

BofA analyst Koji Ikeda argues in yesterday's note that concerns that the company is at risk from AI are "overstated" and should be disproven with a "steady string of strong results over time."

BofA reiterated its "buy" recommendation for GitLab and its target price of $72 per share. Meanwhile, in the market yesterday, GitLab shares added 3.7% to close at $49.03 per share. The BofA target price now offers 47% upside.

The bank thinks that investors should not "sleep on this one," calling GitLab an attractive risk/reward for investors as the stock trades about in line with peer infrastructure software companies but is projected to grow much faster.

Context

BofA's note was a kind of response to Capital One's July downgrade of GitLab. On July 16, Capital One analyst Connor Murphy downgraded both GitLab and its peer Atlassian to "equalweight" from "overweight," noting slower customer acquisition and a shrink in the average revenue per user. With the rise of alternative AI tools, companies that integrate private code generation rather than relying on external vendors also could hamper the value proposition of Atlassian and GitLab, Murphy wrote.

Ikeda believes that the GitLab platform continues to be "viewed [by customers] favorably."

"While there is still a heavy debate if code-generation tools are credible disruptors to GitLab’s value proposition, one thing is certain – AI is generating a lot more code and understanding context and purpose is becoming a lot harder to do," Ikeda wrote.

Most Wall Street analysts remain bullish on the stock, with 25 “buy” ratings versus only five “holds,” according to MarketWatch. The average target price of $61.81 per share implies 26% upside from the last close.

The AI translation of this story was reviewed by a human editor.

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