Is GitLab (GTLB) Undervalued As Its 19.4 AI Release Expands Cost Controls?

GitLab (GTLB) just rolled out GitLab 19.4, a product release that leans into AI driven automation with new tools for setting goals, choosing models, and tracking per user costs.

GitLab’s recent AI heavy release lands after a sharp 90 day share price return of 85.35% and a 30 day share price return of 15.56%. The 1 year total shareholder return is slightly down 1.93%, which suggests short term momentum has picked up even as longer term holders have seen more muted results.

GitLab now has a fast moving AI story and a business generating over US$1.0b in annual revenue. After a sharp run in the share price, the real issue is whether that story is already fully priced in.

Most Popular Narrative: 8% Undervalued

Against GitLab’s last close of $49.23, the most followed narrative pegs fair value at $53.57, suggesting some optimism is still priced in but not excessive froth.

GitLab's expansion of AI driven capabilities across its DevSecOps platform, including the upcoming Duo Agent Platform with hybrid usage based monetization, is expected to capture increased demand for automation and developer productivity tools, potentially accelerating revenue growth and expanding margins as high value features command premium pricing and upsell opportunities.

See why 79 investors see GitLab as 8% undervalued.

The narrative framework uses an 8.51% discount rate and assumes revenue growth of roughly 15.3% a year, with profit margins eventually moving from a current loss of $52.7 million toward an 11.5% margin that would equate to about $185.5 million of earnings. To line up with the $53.57 fair value, the story also leans on GitLab trading on a future P/E of 62.4x those projected earnings, which is higher than the current 31.0x multiple applied to the wider US software group.

For anyone weighing GitLab against other AI infrastructure plays, the key question is whether that richer future multiple and the shift to hybrid seat plus usage pricing feel realistic given GitLab’s forecast that revenue grows at 13% a year and profitability is not expected within the next three years. The narrative effectively asks investors to accept today’s loss making profile and relatively modest growth forecasts in exchange for a long runway of AI related monetization on a business already generating over $1.0b in annual sales.

Result: Fair Value of $53.57 (UNDERVALUED)

Still, the GitLab story can break if competition from GitHub and AI native tools pressures pricing, or if Flex and seat plus usage pricing proves harder to roll out at scale.

Find out about the key risks to this GitLab narrative.

Next Steps

Mixed signals in GitLab’s story so far. If you want to move quickly and ground your own view in the numbers, start by weighing its 1 key reward and 1 important warning sign through 1 key reward and 1 important warning sign.

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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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