Gitlab Layoffs 2023: What to Know About the Latest GTLB Job Cuts

Contributor to an unwanted list, Open-Core DevOps Specialist Gitlab (NASDAQ:GTLB) was the latest tech company to announce layoffs. The news comes amid a market session that weakened on Thursday as concerns over monetary policy weighed on sentiment. Following the announcement of the job cuts – which will affect about 7% of the workforce – GTLB shares fell more than 12% in the early afternoon.

Gitlab CEO Sid Sijbrandij made the unfortunate announcement in a message to employees. “The current macroeconomic environment is difficult and as a result companies are still spending, but they are being more conservative about software investments and taking more time to make purchasing decisions,” Sijbrandij said.

Gitlab focuses on DevOps, or a unified protocol that automates and integrates processes between software development and IT teams, and offers this enterprise-level service to top institutions. These include Goldman Sachs (NYSE:GS), UBS (NYSE:UBS), NVIDIA (NASDAQ:NVDA) And Siemens (OTCMKTS:VICTORY).

Despite this advantage, Gitlab was unable to build forward momentum. “I had hoped that reprioritizing our spending would be enough to weather the deepening global economic downturn. Unfortunately, we need to take further steps and align our spending pace with our commitment to responsible growth,” added Sijbrandij.

Unfortunately, GTLB stock joins the growing ranks of publicly traded tech companies to announce layoffs.

Profitability concerns may have caught up with GTLB stock

Primarily, negatively affected technology companies cited deteriorating macroeconomic conditions as a contributing catalyst to their downsizing. However, for GTLB stocks, this representation could be more pronounced due to the underlying company’s lack of profitability.

According to Gurufocus, Gitlab has a trailing-12-month net margin of 47.3% below breakeven. To be fair, the company is making progress on this front. For its most recent quarter ended October 31, 2022, Gitlab reported a non-GAAP loss of 10 cents per share. This came out better than expected and narrowed the red ink from a 34 cent loss last year.

Still, the net loss on a TTM basis is $179.4 million compared to a loss of $155.1 million for the year ended January 31, 2022. Given the possibility that the Federal Reserve will continue to raise interest rates, promise those losses don’t bode well for GTLB stocks. In fact, Fed Chair Jerome Powell has hinted that an unusually resilient labor market may require rate hikes.

Certainly, one of Gitlab’s key strengths lies in its balance sheet, particularly its zero-debt profile. However, cash and cash equivalents have recently declined significantly. At the end of fiscal 2022, Gitlab reported $884.7 million in cash on hand. On a TTM basis, that stat sits at $372.2 million.

Also, cash flow from financing mitigates losses in free cash flow. However, macro-driven pressures can force more funds under undesirable circumstances. As such, investors seemed skeptical about GTLB stock.

Why it matters

While the circumstances are looking ugly for GTLB stock, it’s important to recognize that overall Wall Street stock valuations are still high. Accordingly TipRanks, Gitlab holds a strong buying consensus view. Also, analysts expect the shares to reach $61.80 on average, which represents an upside potential of about 43%.

Still, hedge fund sentiment for GTLB stocks has been very negative, urging potential investors to exercise significant due diligence.

On the day of publication Josh Enomoto had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author and are governed by InvestorPlace.com Posting Policies.