GitLab’s stock slide presents a 40% bargain upside opportunity.

After seeing its shares rise nearly 200% in the nine months leading up to last February, software company Gitlab Inc NASDAQ: GTLB was finally starting to emerge from a multi-year hiatus. Having chosen to IPO in late 2021, it was one of those tech stocks that initially skyrocketed but then crashed in 2022.

The subsequent 80% decline, which only bottomed out in May last year, is proof of this. Therefore, investors started to get excited at the beginning of the year, when suddenly Gitlab’s rally lost its legs.

Weak forward guidance

The culprit was a mixed earnings report in the first week of March. Despite analysts’ expectations for both revenue and earnings, Gitlab’s forecasts for the full fiscal year have come to light, which has spooked investors. The stock has been trending lower ever since and actually hit a new low in Thursday’s session, but the interesting thing is that no analyst has given up.

Indeed, immediately after the report, while Gitlab shares were in free fall, firms like Goldman reiterated its Buy rating, as did the teams at Mizuho, ​​William Blair, and Piper Sandler. Key among these decisions to remain optimistic about Gitlab’s prospects was its consistent revenue outperformance and the fact that most felt the forward guidance offered was too conservative. Instead, they see potential increases in profitability through pricing strategies and the opportunity to leverage artificial intelligence (AI).

However, this was not enough to stop the exodus of investors and the shares fell. Towards the end of March, however, more analysts zeroed in on the buy opportunity as KeyBanc gave Gitlab an Overweight rating. They see the technology vertical in which Gitlab operates, DevOps, as “critical” and a “must-have category for software investors.” Then, last week, the Wells Fargo team made the same move, rating Gitlab Overweight and giving it a $70 price target. With shares on the verge of falling below $50, this indicates a solid targeted upside of nearly 40%.

An entry opportunity

They believe the current sell-off is sending stocks into oversold territory, making this a solid entry opportunity for those of us on the sidelines. Raymond James echoed this theme, rating and price target last Friday.

But Gitlab stock continues to fall and is currently down more than 30% from its pre-earnings price. So what gives? This is a company that just reported record revenues and its second best result ever. Furthermore, numerous analysts have declared their bullish outlook on the stock, with an expected upside of up to 40% or 50% from current levels.

Getting involved

While the company’s weak forward guidance drove the initial phase of the sell-off, this entire month has been part of a broader decline in shares. The benchmark S&P 500 index, for example, is experiencing its worst period of the year, as markets reel from an unexpected resurgence in inflation. Since last November, the risk appetite that has fueled most stocks, including Gitlab, has definitely eased, but it’s hard to see the situation becoming anything more serious, at least for now.

If nothing else, this is a healthy correction for the broader market and one that makes Gitlab stock incredibly undervalued for bargain-hunting investors. From a technical perspective, the stock had even hit a double bottom, a bullish pattern that indicated an impending rally, before the S&P 500’s fall picked up pace last week. Heading into the final weeks of April, investors should keep an eye on the major indexes and Gitlab, as any sign of a turnaround in the former should lead to a rapid recovery in the latter.

Before you consider GitLab, you’ll want to hear this.

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