Despite record cash flow and a promising AI transformation, the GitLab stock price plummeted by over 30%. In this article, I will review my investment case and explain why I added to my position.
Hi Stefan, I wonder what the impact might be if things go completely wrong with the previous CEO and largest shareholder with voting rights, given his serious health problems? I find it very delicate to ask, but it is nevertheless an important concern.
You are right. It's a delicate but very good question. There's a lot of uncertainty surrounding Sid's health and his intentions for the future of the company he has built. I can only speculate that this uncertainty may already be a reason for the relatively low valuation of GTLB compared to its peers. I stay invested despite this uncertainty because I trust the new CEO Bill Staples will steer the ship into the right direction even without Sid if it's necessary.
Hi Stefan, Do you have any thoughts on how AI-driven developer efficiency might impact GitLab’s seat expansion? Are you already factoring that into your 25% growth estimate? I know it’s difficult to quantify right now, but it feels like the market is pricing in this uncertainty and pushing the stock down because of it.
Yes, I think you are right, this is an issue that face also all application software companies with a per-seat licensing model. The answer will be to change the pricing model more in the usage-based direction. Nobody can quantify these negative AI-driven effects, but it's there and it will require a lot of change management of the software providers.
Thanks, market is punishing the stock for this uncertainty. Usage based model will work on enterprise license but individual licenses will be tricky to charge that way.
It is generating 88% gross profit and going to post net profit soon! Operating leverage is going to kick in as well. IMO, its EV/Sales at 7x is cheap for a SaaS company like this. I will continue to hold and add if it crashes further.
Last week it was able to quickly identify a vulnerability and addressed it - demonstrating commitment to keep the platform safe.
Looking to hear more updates from you on this stock .
You are correct. It's just that when you are running a company like GitLab, you are obsessed with MAU (monthly active users). It's a proxy for gaining market share and growth. The financial metrics you analyze are important, but more across the years. Quarter to quarter, management is trying different approaches to increase MAU.
I'm not saying the numbers are not important. Quite the opposite, and I give you actual kudos for the article. Just that my investing approach is to:
First, look at the key metrics that drive the company's growth (MAU and revenue are key for a company like GitLab).
Second, look into the numbers (which your article covers pretty well).
Great write up!!
Enterprises that want to avoid MSFT prefer Gitlab .
the total addressable market is over $40 billion and if the current mgmt. continue to execute well, it will be rewarded by investors.
Also , that will alleviate the concerns of key man risk( Sid).
Great write up!
Hi Stefan, I wonder what the impact might be if things go completely wrong with the previous CEO and largest shareholder with voting rights, given his serious health problems? I find it very delicate to ask, but it is nevertheless an important concern.
You are right. It's a delicate but very good question. There's a lot of uncertainty surrounding Sid's health and his intentions for the future of the company he has built. I can only speculate that this uncertainty may already be a reason for the relatively low valuation of GTLB compared to its peers. I stay invested despite this uncertainty because I trust the new CEO Bill Staples will steer the ship into the right direction even without Sid if it's necessary.
Hi Stefan, Do you have any thoughts on how AI-driven developer efficiency might impact GitLab’s seat expansion? Are you already factoring that into your 25% growth estimate? I know it’s difficult to quantify right now, but it feels like the market is pricing in this uncertainty and pushing the stock down because of it.
Yes, I think you are right, this is an issue that face also all application software companies with a per-seat licensing model. The answer will be to change the pricing model more in the usage-based direction. Nobody can quantify these negative AI-driven effects, but it's there and it will require a lot of change management of the software providers.
Thanks, market is punishing the stock for this uncertainty. Usage based model will work on enterprise license but individual licenses will be tricky to charge that way.
It is generating 88% gross profit and going to post net profit soon! Operating leverage is going to kick in as well. IMO, its EV/Sales at 7x is cheap for a SaaS company like this. I will continue to hold and add if it crashes further.
Last week it was able to quickly identify a vulnerability and addressed it - demonstrating commitment to keep the platform safe.
Looking to hear more updates from you on this stock .
For potential GitLab investors, the key question is not about a specific financial metric or a funky AI feature.
But rather: "When will it catch up with GitHub in terms of users?".
Why should this be the key question for investors? This is not a "winner takes it all" market.
You are correct. It's just that when you are running a company like GitLab, you are obsessed with MAU (monthly active users). It's a proxy for gaining market share and growth. The financial metrics you analyze are important, but more across the years. Quarter to quarter, management is trying different approaches to increase MAU.
I'm not saying the numbers are not important. Quite the opposite, and I give you actual kudos for the article. Just that my investing approach is to:
First, look at the key metrics that drive the company's growth (MAU and revenue are key for a company like GitLab).
Second, look into the numbers (which your article covers pretty well).