Chicago, IL – October 25, 2024 – Zacks Equity Research shares GitLab GTLB as the Bull of the Day and Baidu BIDU as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Amicus Therapeutics, Inc. FOLD, Clipper Realty Inc. CLPR and Harrow, Inc. HROW.
Here is a synopsis of all five stocks.
In addition to raising GitLab's growth estimates for the next several quarters, general optimism about the company's niche is encouraging.
Truist put out a note right after earnings citing "We believe that the company is executing on their opportunity to offer enterprises a platform solution for DevOps, in what has been a highly fragmented market to this point. The company also highlighted promising wins with newer offerings, showcasing their ability to leverage their enterprise foothold into extended sales opportunities."
The Truist team led by Joel Fishbein increased their estimates "on incremental optimism" and reiterate their Buy rating and $80 price target for GTLB shares. I thought their general investment thesis and comments on the duration of GitLab's market opportunity to be especially encouraging as well considering the rapid adoption of AI software development tools...
With global enterprises accelerating their digital transformation efforts and adoption of DevOps practices, we believe that GitLab is in a position to benefit from a long tail of durable growth. We believe that shares are relatively attractive to other names in infrastructure software when considering the longevity of the opportunity ahead of them and the compounding growth in their recurring revenue model.
The Truist view inspired me to see what other analysts were missing. I found a couple playing catch-up.
On October 9, MS analyst Sanjit Singh initiated coverage of GTLB with an Overweight rating and $70 price target, describing the company as poised to become the next "enterprise platform story in software" as a "key consolidator" in the fragmented and fast-growing software delivery market.
Customers are expected to take the platform approach to software development amid "tougher IT budgets, growing integration cost and lost productivity from switching between multiple apps," the Morgan Stanley analyst wrote.
"With a platform that addresses all workflows involved in releasing and securing software and having already secured market-leading positions" in source code management and continuous integration and delivery, GitLab is poised to emerge as a 'strategic platform' in the market for software development and IT operations."
Singh concluded that GitLab's core business may generate a compound annual growth rate of 17% over the next four years to as much as $24 billion in 2027.
Needham analyst Mike Cikos put out a note this week upgrading the stock from Hold to Buy with a $70 PT. He focused on GitLab's expanded enterprise product offerings, with the Ultimate level gaining traction due to innovations like Duo Pro Enterprise and Dedicated. Despite his late entry to the bull camp, Cikos offered a diversity of interesting data points to understand the company and the business.
Cikos highlighted recent data from GitLab that shows seven out of the company’s top 10 deals in the second quarter of fiscal 2025 were for Ultimate, and 65% of new dollars from $100,000-plus customers came from this tier. Innovations like Dedicated and Duo Pro, exclusive to Ultimate, further enhance its appeal.
Cikos also gave a good frame of reference for GitLab's opportunity in the face of big competition from Microsoft’s GitHub. He thinks that GitLab’s focus on security and compliance gives it an edge as a neutral vendor not competing with clients in any respect.
Cikos expects increased adoption of Ultimate compared to their Premium service, driven by stronger Enterprise sales and GitLab’s compliance and security features, which are crucial for large organizations. This will expand margins.
And as another bright horizon, the analyst anticipates that GitLab will continue growing its public sector presence, aided by its recent product launches and federal security certifications.
Bottom line: GTLB looks like a good enterprise software play here as it climbs out of a 7 month base.
Baidu is the premier AI technology company in China and its shares recently benefited from the late September PBOC stimulus program.
BIDU shares vaulted 35% from $86 to $116 in just eight trading days.
But just as quickly, the excitement has faded and the stock is back below $90, much to the surprise of uber China bulls.
My colleague Andrew Rocco has written extensively about the exploits of one such enthusiast, namely celebrity hedge fund manager David Tepper who helms the Appaloosa Fund.
You can find some good recent coverage here...
Sep 26: Tepper Crushes China Trade: Here's Why he's Still Bullish
Aug 19: Is it Time to Buy Chinese Stocks?
What stands out is that Andrew was anticipating the extreme value in China tech shares even before the PBOC booster action.
So why is Baidu in the cellar of the Zacks Rank?
Revenue estimates for Baidu continue to drift in the zero to 5% range.
But it's the downward pressure on EPS projections that make for the #5 Rank.
In the past month, the consensus for this year has slipped a trifle from $11.33 to $11.17. But 2025 estimates have dropped 5% from $12.28 to $11.68.
Not a dramatic slide, but given the top line "flat line" it's concerning for growth investors looking at a foreign economy that is even having trouble boosting their own equities.
Bottom line: I've always been a fan of Baidu for their AI innovation and central position in the AI economy. I hope some day soon that their government gets out of the way and lets foreign investors (us) participate in their upside.
Here are three stocks with buy rank and strong momentum characteristics for investors to consider today:
Amicus Therapeutics, Inc.: This biotechnology company has a Zacks Rank #1 and witnessed the Zacks Consensus Estimate for its current year earnings increasing 10% over the last 60 days.
Amicus Therapeutics, Inc. price-consensus-chart | Amicus Therapeutics, Inc. Quote
Amicus Therapeutics' shares gained 10.2% over the last three months compared with the S&P 500’s advance of 6.8%. The company possesses a Momentum Score of A.
Amicus Therapeutics, Inc. price | Amicus Therapeutics, Inc. Quote
Clipper Realty Inc.: This real estate company has a Zacks Rank #1 and witnessed the Zacks Consensus Estimate for its current year earnings increasing 43.6% over the last 60 days.
Clipper Realty Inc. price-consensus-chart | Clipper Realty Inc. Quote
Clipper Realty's shares gained 68.2% over the last three months compared with the S&P 500’s advance of 6.7%. The company possesses a Momentum Score of B.
Clipper Realty Inc. price | Clipper Realty Inc. Quote
Harrow, Inc.: This eyecare pharmaceutical company has a Zacks Rank #1 and witnessed the Zacks Consensus Estimate for its current year earnings increasing 164.3% over the last 60 days.
Harrow, Inc. price-consensus-chart | Harrow, Inc. Quote
Harrow's shares gained 127.2% over the last three months compared with the S&P 500’s advance of 6.7%. The company possesses a Momentum Score of A.
Harrow, Inc. price | Harrow, Inc. Quote
See the full list of top ranked stocks here
Learn more about the Momentum score and how it is calculated here.
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