Why Should Traders Stack GitLab Shares for a Possible 35% Upside?

Why Should Traders Stack GitLab Shares for a Possible 35% Upside?

GitLab, a tech-based firm, is buzzing for all the right reasons. Even though its year-to-date performance might not attract a lot of eyeballs with a 10.51% dip, the company has been in the news over the past few days courtesy of massive acquisition talks. All that has resulted in a 30-day price surge of almost 25%.

Trading.biz analyst Rahul Nambiampurath believes that the price-specific spotlight is due to the major players, including Alphabet, showing interest in buying GitLab.

“The Google parent company getting into talks about buying GitLab ​​has fueled a surge in GitLab’s stock price, highlighting investor confidence in the company’s strategic value and market position,” adds Rahul.

GitLab Financials and Fundamentals: Bullish Signs!

Besides the buzz regarding the possible acquisition, there are other reasons to consider GitLab (GTLB) as a trading/investing pick. These include:

• Innovation edge with GitLab’s continuous innovation in AI-powered DevSecOps solutions, which keep it ahead of competitors and drive customer adoption.
• Top-of-the-line financials: Consistent revenue growth and better-than-expected earnings performance highlight GitLab’s robust business model.

Rahul delved deeper into the Q2 2024 financial report, released on June 3, 2024. Here are the key findings:

• Revenue Growth: GitLab reported revenues of $169.19 million, surpassing the expected $165.66 million.
• EPS Improvement: The company posted an EPS of ($0.24), better than the consensus estimate of ($0.33).
• Cash and Cash Equivalents: GitLab’s cash reserves stood at $273.23 million, down from $295.40 million in the previous quarter. This highlights strategic investments and operational expenses.
• ​​Net Retention Rate: A high dollar-based net retention rate, which includes upsells and reduced attrition, points to strong customer loyalty.

Rahul believes that GitLab’s Q2 2024 financial results demonstrate the company’s steady growth trajectory and strategic resilience.

“With revenue and EPS beating expectations, alongside a solid ARR and strong customer retention, GitLab stands as a compelling investment opportunity,” mentions Rahul.

Tracking the Price Action

Rahul dived into the daily chart of GTLB, supplementing price-based analysis with fundamentals. Per Rahul’s analysis, GTLB has broken out of the triangle pattern with a gap-up move. Even though a correction is usually inevitable after a gap-up, a strong support level exists at $50.88 for GTLB.

If the stock respects that level and eventually breaches the strong resistance of $56.71, the next key levels could be $61.18, $65.66, and eventually $71.19, which translates to a 35% surge.

Rahul’s technical analysis is validated by Koji Ikeda from Bank of America, who has a strong “Buy” Rating for GTLB with a price target of $80.