A Look At GitLab (GTLB) Valuation After Recent Analyst Downgrades On AI Competition Concerns

Why recent downgrades put GitLab (GTLB) back under the microscope

Morgan Stanley and Barclays recently downgraded GitLab (GTLB), highlighting worries about tougher competition from AI startups, frequent management changes, and a more cautious stance on the company’s future growth prospects.

See our latest analysis for GitLab.

The recent downgrades landed after a sharp reset in sentiment, with GitLab’s share price at US$32.84 and a 1 day share price return of 7.10% decline, adding to a 90 day share price return of 28.34% decline and a 1 year total shareholder return of 54.03% decline. This suggests momentum has been fading as investors reassess growth prospects and competitive risks around AI driven development tools.

If GitLab’s pullback has you thinking about where else growth and AI might show up, it could be a good moment to sift through high growth tech and AI stocks for other potential ideas.

With GitLab trading at US$32.84, a value score of 4, and a quoted 52% intrinsic discount plus a large gap to analyst price targets, you have to ask: is this weakness a chance to buy, or is future growth already priced in?

Most Popular Narrative: 35.8% Undervalued

GitLab’s most followed narrative pegs fair value around $51.15, well above the last close at $32.84. This puts a spotlight on what is driving that gap.

The ongoing migration from on-premises to cloud-based development, coupled with GitLab's scaling SaaS and Dedicated offerings (with SaaS up 39% YoY and Dedicated ARR up 92% YoY), will likely improve gross margin leverage, aid in operating efficiency, and support expansion of net margins and free cash flow.

Read the complete narrative.

Curious what justifies that fair value gap? The narrative leans heavily on future revenue expansion, margin uplift, and a rich earnings multiple that assumes meaningful execution. The exact hurdle baked into that $51.15 figure might surprise you.

Result: Fair Value of $51.15 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, that fair value story can quickly crack if competition from Microsoft’s GitHub bites harder than expected or if execution stumbles keep revenue growth and margins from tracking the narrative.

Find out about the key risks to this GitLab narrative.

Build Your Own GitLab Narrative

If you see the numbers differently or prefer to test your own assumptions, you can build a personalised GitLab view in minutes with Do it your way.

A great starting point for your GitLab research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

Looking for more investment ideas?

If GitLab has you rethinking your watchlist, do not stop here. Use this momentum to scan for other clear stories that fit your style.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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