(Still) Waiting for a Star to Fall
When will patience pay off?
EDIT: The stock price for GitLab fell significantly after this article was written, so on May 4th, 2023, I entered a bigger position at 27 Dollars. Still believe it may drop much lower, but should that happen, I will continue to build from here. Let’s see how it plays out.
For now, the prediction remains correct.
Boy Meets Girl, the one-hit wonder behind the famous song, may have waited for their star to fall since 1988, but make no mistake, patiently standing on the sideline waiting for Gitlab to drop to a decent price point has been very frustrating too. The stock may have dropped more than 50% the last year, but with price-to-sales still, at ridiculously high levels, it is more or less impossible to motivate an entry point, despite the company growing revenue by roughly 70% in the last quarterly report.
GitLab is an open-source software suite that allows developers to collaborate, store code and manage projects. It has quickly become one of the most popular development platforms due to its ease of use, scalability and flexibility. The company provides an all-in-one solution for software development and DevOps, which combines version control, code review, CI/CD pipelines, issue tracking, project management and more into one platform.
GitLab also offers some free (and neat) open-source tools to the public to promote the company and drive innovation amongst developers around the world. I suspect that GitLab, at some point, will push Microsoft-owned GitHub out of the developer equation, an assumption (or hope) Alphabet is betting on too.
So long story short: I love the company. I am impressed by the company’s growth.
But I wouldn't say I like the stock price, as profitability is still VERY far away.
A 6.9 Billion USD valuation for a company scoring just above 110 million USD in revenue per quarter is just too steep, and the lacklustre macroeconomic circumstances are not helping.
So why am I writing this article?
To give us all a chance to set price alerts way below the current stock price. I believe it will be possible to buy GTLB 0.00%↑ around 20 dollars fairly soon, maybe even hitting the range of 10-20 USD.
A theoretical fair value would even be around one dollar, but with Blackrock, Citadel, Morgan Stanley and The Vanguard Group all buying, I doubt the price action will ever be allowed to drop towards any “fair” value.
As mentioned, Alphabet is also on board ever since 2018. They have more than doubled their holdings in Gitlab in the past quarter, and thinking long-term, I think Alphabet may step up and purchase the whole company sooner or later. Especially given that they tried to purchase GitHub too but lost the bidding battle to Microsoft. And IF Alphabet goes after GitLab, a premium price will likely be in the cards.
This November, GOOGL 0.00%↑, has been hitting GitLab stocks in several purchases in the range of 33-37 $. I, therefore, find that range to be a reasonable entry point to enter a position. If there will be opportunities to increase holdings at even lower price points, I will continue to do so. The company is debt-free and has a strong balance sheet, so they seem well-fitted to ride out any financial storm we might face in the next few years.
Competitor Analysis
Gitlab faces competition from other software suites such as GitHub, Bitbucket and Atlassian's JIRA & Confluence products. Compared to its competitors, Gitlab offers a more comprehensive set of tools than any single competitor with version control (git), issue tracking (issues), project management (boards), continuous integration/delivery (CI/CD), and security testing all integrated within a single product offering. This makes for an attractive solution for customers who want all their needs met within one package without integrating multiple solutions or switching between different services during their development process.
In addition, Gitlab has robust enterprise offerings that can be used by larger companies with specific requirements like private networks or additional storage space, which sets them apart from smaller-scale solutions offered by its competitors.
Looking at the obvious comparison between Lab vs Hub, there are a few key factors that make GitLab come out on top, ahead of GitHub.
GitLab's features are more robust and comprehensive compared to Github. For example, GitLab offers a built-in CI/CD pipeline that can be used to automate the deployment of applications and services.
User management in GitLab is more powerful as it allows users to create groups with different access levels and visibility settings. Also, while both platforms offer private repositories, only Gitlab provides unlimited free private repositories.
Unlike GitHub, which has limited issue-tracking capabilities, GitLab comes with advanced issue-tracking tools that make it easier for teams to collaborate on projects efficiently.
GitHub will cost you less, but GitLab will give you more.
Price Prediction Five Years From Now
Although this space is crowded with strong brands such as Microsoft, Atlassian and IBM, given GitLab’s competitive positioning, financial performance and growth prospects, within five to seven years from now, the stock could reach prices somewhere around $160-$250 per share, depending on overall industry conditions.
Of course, future economic events may cause fluctuations up or down, but those who slowly get into this potential DevOps goldmine before the next Growth Tech Hype cycle seem likely to benefit once the shares and the company reach full maturity five years down the road.
DISCLAIMER
Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk, and the past performance of a security or financial product does not guarantee future returns.
Investors have to conduct their research before beginning any investment. The risk of losing all or part of the money must always be considered before investing.