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Guggenheim Initiates "Buy" Rating on GitLab, Downplays AI Risks
ByAinvest
Tuesday, Sep 16, 2025 1:44 pm ET1min read
Guggenheim initiates coverage of GitLab Inc. (GTLB) with a "Buy" rating and a $70 price target. Analysts downplay AI risks, citing increased developer headcount and AI code assistants augmenting workflows, complementing GitLab's comprehensive DevSecOps platform. The firm views GitLab as a leading enterprise-focused DevSecOps platform with a high retention rate of over 95%.
Guggenheim initiated coverage of GitLab Inc. (GTLB) with a "Buy" rating and a $70 price target, downplaying risks associated with artificial intelligence (AI) [1]. Analysts at Guggenheim believe that the increasing headcount of developers, driven by the adoption of AI, will significantly boost demand for GitLab's software platform.The firm views GitLab as a leading enterprise-focused DevSecOps platform, with a high retention rate of over 95% [1]. Guggenheim asserts that AI code assistants primarily augment developer workflows and complement GitLab's comprehensive DevSecOps platform. Internal surveys indicate that most enterprises plan to grow their developer headcount, which should lead to substantial usage of the software platform [1].
GitLab Inc. provides an integrated, single-application platform for the entire DevOps lifecycle, offering tools for software development, security, and operations (DevSecOps) [1]. The company's AI-native DevSecOps platform has driven strong customer adoption and financial momentum, despite a recent technology sell-off [2]. GitLab's stock has recovered, trading at about 63% below its all-time high, indicating cautious investor sentiment [2].
The company's AI-powered suite, GitLab Duo, is seeing rapid traction, with weekly usage rising sixfold so far in 2025 [2]. GitLab has positioned itself as an AI-native DevSecOps company, embedding AI across the entire software lifecycle. The company's recent financial performance has been healthy, with revenues rising 29% year over year to $236 million and non-GAAP operating margin at 17% in the second quarter of fiscal 2026 [2].
Guggenheim's analysts believe that concerns about AI coding assistants replacing developers who leverage GitLab's solutions are overblown [1]. The firm expects the company's revenues to reaccelerate in fiscal 2026, with strong adoption of GitLab Ultimate, its highest-value tier, and GitLab Dedicated, its single-tenant SaaS version of its enterprise DevSecOps platform [2].
GitLab's stock is trading at 9.4 times sales, lower than its three-year average price-to-sales (P/S) ratio of 13.7x, indicating a reasonable valuation relative to its potential [2]. Investors willing to tolerate near-term volatility should consider picking a small stake in this stock now.
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