Earnings Previews: GitLab, Zscaler

U.S. markets are closed Monday for the Labor Day holiday.

After markets close Tuesday afternoon, two technology companies are scheduled to report results.

GitLab

GitLab Inc. (NASDAQ: GTLB) provides a collaborative software development platform in the United States, Europe, and Asia. Since its IPO in October of 2021, the stock has shed more than 55% of its value. The artificial intelligence boom has lifted the share price by more than 80% since the stock’s all-time low set in early May. The stock jumped when the company reported first-quarter results, and the company raised its basic subscription price by $10 a month and said it would charge $9 a month more for its generative AI add-on. Over the past 12 months, GitLab has cut its cash burn from $36.3 million to $11 million in the first quarter of the 2024 fiscal year. Analysts have set a pretty low bar for second-quarter results, and a beat could send the stock shooting higher.

Of 17 brokerages covering the company, 12 have given the stock a Buy or Strong Buy rating, with a Hold rating from the other 5. At a current price of around $49.00, the upside potential based on a median price target of $59.00 is 20.4%. At the high price target of $70.00, the upside potential is 42.9%.

Second-quarter revenue is forecast at $129.79 million, up 2.3% sequentially and up more than 28% year over year. Analysts have a consensus estimate for an adjusted per-share loss of $0.03, better than the prior quarter’s loss of $0.06 per share and much better than the year-ago loss of $0.15. For the full 2024 fiscal year ending in January, GitLab is expected to post an adjusted loss of $0.14 per share compared to last year’s loss per share of $0.46. Revenue is forecast to rise 28% to $542.99 million.

GitLab is not expected to post a profit in 2024. The consensus estimate calls for earnings per share (EPS) of $0.03 in 2025 and $0.35 in 2026. The company’s enterprise value to sales multiple for 2024 is 12.2. For 2025, the multiple is 9.5 on estimated sales of $700.44 million, and for 2026 the multiple is 7.4 on sales of $900.3 million. The stock’s 52-week range is $26.24 to $62.12. The company does not pay a dividend. Total shareholder return for the past year was negative 2.69%.

Zscaler

Shares of cloud security company Zscaler Inc. (NASDAQ: ZS) have added more than 41% so far in 2023 and are up nearly 9% for the past 12 months. Since posting an all-time high in November of 2021, the stock is down by about 57%. The latest bump in the company’s recovery road came when Microsoft announced a competing product in mid-July. Zscaler’s stock has recovered about 15% since then, but the path has been fairly bumpy.

Of 42 analysts covering the stock, 28 rate the shares a Buy or Strong Buy, and the rest give the stock a Hold rating. At a current price of around $158.00, the upside potential based on a median price target of $170.00 is 7.6%. At the high price target of $225.00, the upside potential is 42.4%.

Analysts are expecting fourth-quarter revenue of $430.59 million, up 2.8% sequentially and up 35.4% year over year. Adjusted EPS is forecast to reach $0.49, up 2.5% sequentially, and up 96% year over year. For the 2023 fiscal year that ended in July, Zscaler is expected to post EPS of $1.63, up 136.8%, on sales of $1.59 billion, up 45.8% year over year.

At the current share price, the stock trades at a multiple of 96.9 times expected 2023 EPS, 75 times estimated 2024 earnings of $2.11, and 58.5 times estimated 2025 earnings of $2.71 a share. The stock’s 52-week range is $84.93 to $194.21. Zscaler does not pay a dividend. Total shareholder return for the past year was 8.80%.

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