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March 5, 2024

GitLab (GTLB): Good Quarter, Questionable Guidance. Book The Gain

Sell GitLab (GTLB) and Shopify (SHOP)

GitLab (GTLB): Good Quarter, Questionable Guidance. Book The Gain

GitLab (GTLB) reported a very solid Q4 fiscal 2024 after the close yesterday that beat expectations across the board. But, and it’s a big but, management’s guidance for fiscal 2025 revenue growth (+25.5%) came in below expectations AND management talked about being “less conservative” with respect to revenue guidance. This creates a tough setup for a stock that went into earnings carrying high expectations and will likely leave investors wondering what it all means. We could get deeper into details on all the reasons GitLab has a compelling longer-term opportunity in the DevOps market and how new products, including those centered around AI, will propel the stock much higher over the long haul. But I think we should simply book the gain now and come back to the story later, when the growth trajectory is less murky. Sell for a roughly 20% gain. SELL

Shopify (SHOP) has seen its shares begin to slip. I love this company and think shares will go much higher over the long-term. But since the last earnings call, the big question I continue to hear around SHOP is regarding the profit trend, which several analysts feel is at risk of disappointing, at least in the short-term. With shares losing momentum and no near-term catalyst, let’s not over-think it. Book a gain of around 17%. SELL

Tyler Laundon is chief analyst of the limited-subscription advisory, Cabot Small-Cap Confidential and grand slam advisory Cabot Early Opportunities. He has spent his entire career managing, consulting and analyzing start-up and small-cap companies. His hands-on experience has taught Tyler that the development of a superior business model is the biggest factor in determining a company’s long-term success. Accordingly, his research focuses on assessing the viability of management’s growth strategies, trends in addressable markets and achievement of major developmental milestones.