GitLab (GTLB) Valuation Check As AI Usage Growth And New Guidance Draw Investor Focus

GitLab (GTLB) has drawn fresh attention after issuing new earnings guidance for the first quarter and fiscal 2027, setting revenue expectations between US$253 million and US$255 million for Q1 and US$1.099 billion to US$1.118 billion for the year.

See our latest analysis for GitLab.

GitLab shares trade at US$26.70 after a 1 day share price return of 1.95% and a 7 day share price return of 7.10%. However, the 30 day and year to date share price returns of 23.67% and 26.20% declines, alongside a 1 year total shareholder return decline of 57.48%, suggest that recent enthusiasm around AI usage growth, the MSP Partner Program and the fresh guidance is emerging against a backdrop of weaker longer term momentum.

If GitLab’s AI driven story has your attention, it can be useful to see what else is out there in the sector, starting with 30 AI small caps as a focused set of ideas.

With GitLab guiding to up to US$1.118b in revenue for fiscal 2027, yet shares sitting far below some analyst targets and longer term returns still negative, is this a reset entry point or is future growth already in the price?

Most Popular Narrative: 82.2% Undervalued

GitLab’s last close at $26.70 sits well below a narrative fair value of $150. According to this view, the current price does not reflect the upside implied by its assumptions.

Rumor has it that April 11th is going to be a tragic day in the US, and some analysts are stating that Trump will be delivering his worst speech ever. But what does this have to do with GitLab? As a cyber security specialist, there is a lot more going on throughout our economy and these bearish markets. Cyber attacks are growing at a rapid rate, and investors and hedge funds are resorting to using new tools in trading. These tools are advancing quickly with a higher probability of success than traditional algorithmic trading. At the same time, countries such as North Korea are using similar tools to steal millions from the US government. Once a favorite place for many, the markets are picking back up a negative reputation.

But where does "GTLB" come into play? Open-source technology is growing at a sophisticated pace that some of the so-called Major 7 cannot keep up with. As large technology companies such as Microsoft, Tesla and Nvidia face the risk of cyber attacks and automated activity draining free cash flow, they are increasingly exposed. The Major 7 allowed open-source technology to start gaining ground in these bearish markets, giving GitLab an opportunity to make a stand with its "DevSecOps" system security.

GitLab has been creating partnerships with Amazon and Google, and Google is one of its main investors. The full impact of growing cyber attacks has not yet set in for many market participants. With open-source technology, GitLab is seeking to demonstrate that even the Major 7 face challenges in protecting themselves. GitLab is still in development and not yet a household name, but with technology increasingly embedded in everyday life, some investors view it as a company that could gain more attention over the longer term.

Read the complete narrative.

Curious how that $150 figure is built? This narrative leans heavily on rapid revenue compounding, rising profit margins and a future earnings multiple usually reserved for established software leaders.

Result: Fair Value of $150 (UNDERVALUED)

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

However, this hinges on GitLab turning US$906.3m of revenue and a US$46.5m net loss into durable profits, while keeping annual revenue growth near 14% in a competitive sector.

Find out about the key risks to this GitLab narrative.

Another View: Market Pricing Sends Mixed Signals

Our DCF model suggests GitLab at $26.70 is trading well below an estimated fair value of $64.49, which still points to an undervalued setup, just far less aggressive than the $150 narrative. With such different endpoints, which set of assumptions do you find more realistic?

Look into how the SWS DCF model arrives at its fair value.

Next Steps

With such a wide spread of views in play, do you feel the current mood around GitLab is too cautious or not cautious enough? If you want to move quickly from headlines to hard numbers, it is worth weighing up the trade off between concern and optimism captured in our summary of 3 key rewards and 2 important warning signs.

Looking for more investment ideas?

If GitLab has sharpened your focus on where risk and reward can meet, it makes sense to line up a few more names to watch before the next move.

• Target quality at a discount by reviewing our 50 high quality undervalued stocks, a starting point if you want businesses where current prices sit below their fundamentals.
• Prioritise resilience with the 75 resilient stocks with low risk scores, useful when you want companies that score well on stability instead of headline grabbing stories.
• Hunt for potential future favourites through the screener containing 24 high quality undiscovered gems, so you are not only looking where everyone else is already focused.

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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