Analyst advised investors on GitLab stock amid its decline / Photo: X / GitLab
Now is a good time to buy shares of GitLab, the mid-cap creator of a software development platform, says Motley Fool freelance analyst Jeffrey Seiler. The company's stock has collapsed more than 40% since the beginning of the year and is now trading based on "incredibly low" valuations, he believes.
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Investors should pay attention to GitLab securities, says Motley Fool freelance analyst Jeffrey Seiler. Since January 1, they have fallen in price by almost 41%, to $22.15. That, in Seiler's opinion, is too cheap to ignore the company's stock.
The analyst gives such calculations: GitLab securities are traded based on the forecast P/S multiple (Price to Sales, shows the ratio of the company's capitalization to its forecasted annual revenue) equal to three - this is "incredibly low".
The projected EV/S multiple, which evaluates the company's value including debt (EV) in relation to its future revenue, is two. Such numbers are typical of peer companies whose revenue is flat or declining - GitLab's is growing by 15-20%, Seiler writes. In fiscal year 2026, which ended January 31, the company reported revenue growth of 26%, to $955.2 million. In fiscal year 2027, according to the developer's forecast, this figure will grow by about 16%, to $1.1-1.12 billion. The company itself is not satisfied with the expected dynamics, it explained it by the fact that the growth rate of orders lagged behind the growth rate of revenue in the last three years.
Why GitLab stock has fallen in price
Investors fear that GitLab's performance will slow due to the development of competing AI-enabled solutions, according to a Motley Fool article.
Last week, investment bank UBS initiated an analyst follow-up on the company's stock and gave it a "hold" rating. The introduction of AI remains an ongoing threat to the company's reputation, whose growth will slow in the short term, the analysts explained. At the same time, they noted that they "have not heard [from the company's customers] any particular desire to leave GitLab."
UBS is not the only one in its pessimism. On Monday, April 20, RBC Capital worsened its recommendation on the company's securities from "buy" to "hold" and lowered its target price from $33 to $25. Among the reasons for the rating revision, analysts also cited "limited near-term growth opportunities" in the AI era.
Guggenheim also downgraded shares of GitLab from a "buy" to a "hold" rating. This was despite the fact that the company beat the investment bank's revenue forecast for the past fiscal year (it was expecting 19% growth), and Guggenheim, despite the downgrade, noted GitLab's very high customer retention rate, according to the Motley Fool article.
Seiler believes all of these estimates are unfair. Pessimistic predictions about the impact of AI on GitLab's business don't take into account the specifics of its customer base, he explains. The company's customers are mostly in non-technology and highly regulated industries, and security and compliance are important to them. Among them, GitLab counts Southwest Airlines, travel portal Agoda, the Nasdaq stock exchange, and the U.K. Geological Survey. Because of this, much of GitLab's business is conducted on-premises rather than in the cloud, making it much less likely to be impacted by AI, writes freelance analyst Motley Fool.
