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Life after a stock price speed bump
There is a famous song-famous to me, anyway, with lyrics by Dorothy Fields and composed by Jimmy McHugh and which was the hit of a show, Blackbirds, first performed in 1928. The song is “I Can’t Give You Anything But Love.” It has become an American Standard and it has a certain timeless quality-it was recently performed by Lady Gaga. Why do I bring this up at the start of an article about GitLab? (NASDAQ:GTLB) Part of the lyrics go, “Diamond bracelets, Woolworth’s doesn’t sell, baby.” (For those unfamiliar with retail history in this country, Woolworth’s was an American icon through the 1950’s offering items priced between $0.05- and $0.10.). And that is really a metaphor for looking at GitLab as an investment. An expensive diamond bracelet that can’t be procured, except at a premium price.
I last wrote about GitLab 9 months ago when I reviewed the company’s prospects through the lens of generative AI. I recommended buying the shares at that point, after the company’s fall from grace in the winter of 2023 when the company had hit a substantial sales speed bump, announcing layoffs, guiding growth far below what had been anticipated, and talking about a different environment for the company’s services. The shares have appreciated modestly over the last 9 months and are currently about 17% above the price at which I recommended them 9 months ago.
In that time, the company continued to grow at a decent, although no longer at an exceptional rate. Last quarter, revenues grew 33% year on year. . Full year revenue grew by 37%. The company is forecasting revenue growth this year of about 26%. That is now the current consensus.
Perhaps more importantly, last year results show the company going from a non-GAAP operating income loss to a non-GAAP operating income profit and the improvement in free cash flow generation was at even greater cadence, with the company achieving a free cash flow margin of 6% for its latest fiscal year, and 15% last quarter.
Overall, it was GitLab’s forecast, like so many other earnings forecasts in the last 2 months, that brought the shares down by 22%. The company was providing its initial forecast for the current fiscal year. The company is now forecasting that earnings will only reach non-GAAP EPS of just over $0.22; the prior consensus had been for non-GAAP eps of $0.37. The company’s revenue projection of about $730 mil. compares to the prior consensus of $731 million. At this point, traders seem to be having 2nd thoughts about the valuation implosion and the shares are up by about 9% from the low point they reached in the middle of March. The $0.17 difference between the prior consensus and the guide was supposed to be a function of an all-hands meeting, the first in several years and projected to cost $15 million. The other part of the rationale for the constrained EPS guide is more than a bit puzzling. GitLab has a joint venture in China. It consolidates the loss. Last year, the loss was $18 million, and it is projected to be $15 million this year. So, it was surprising to hear the CFO cite this particular loss as a factor in the earnings guide.
Sometimes I wonder if CFOs have a wish to confuse investors deliberately, or if it is a matter of inadvertence. GitLab CFO, Brian Robins, in the most recent conference call, called out normalizing (i.e. improving) buying behavior, above expectation sales results amongst enterprise customers, the effect of a price increase and initial monetization of the company’s AI offering as well as the initial ramp from other significant product initiatives. Last quarter was a record bookings quarter, apparently, well above expectations with the largest 1st order, the largest order in the Ultimate tier, the most million dollar deals ever and good linearity in the quarter. Even hyper-scaler demand was at record levels. The cRPO balance-that is backlog to be recognized in the current year- rose by 40% year on year.
This new guide apparently embodies a less conservative guidance methodology. To be fair, Mr. Robins talked about a ramp and the time it takes new products to contribute meaningfully to growth…but there were plenty of other growth drivers he called out and further acknowledged in his presentation and his answers. Pardon my incredulity, since the guide reflects slowing percentage revenue growth coupled with a step back in operating margin progression. To say that there is cognitive dissonance here is a rather substantial understatement.
Like some companies with an on-prem component to their revenue, GitLab calculates what is called a standalone selling price (SSP) which in turn determines upfront recognition rates for license revenue. This can be a noticeable factor in the cadence of revenue recognition. As the company has not finished its SSP analysis, it used last year’s rate in its forecast.
Part of the reason to recommend GitLab shares is that based on specific statements from the conference call, there is every reason to believe that the company will significantly exceed what has now become the published 1st Call expectations for growth and profitability. I will return to that topic later in this article.
GitLab shares are nominally not cheap. My EV/S estimate is that the shares are valued at over 11X based on a forward revenue estimate of $790 million. I have forecast a free cash flow margin of about 6% and the combination of an EV/S ratio of 11X, a 3 year CAGR of 34% and a 6% projected free cash flow margin puts the shares somewhat above average in terms of valuation, but below the valuations of Snowflake (SNOW), CrowdStrike (CRWD) and Samsara (IOT )to name a few of the more highly valued IT shares.
GitLab shares at this point are very much a “risk-on” trade. They are unlikely to appreciate in periods when high growth shares are under pressure, which has been the case to some degree this week. There is currently some correlation between the performance of NVIDIA (NVDA) shares, and the performance of GitLab shares. While GitLab, as I will discuss, certainly has a significant stake in the future of AI, its correlation with Nvidia is more a function of quantitative trading than anything substantive. But in the short term, shares of GitLab are likely to be influenced by the performance of Nvidia shares, for better or worse.
My recommendation is based on the long-term prospects of GitLab which, while they certainly are somewhat dependent on their AI initiative, are really not correlated with the specific results of Nvidia and the other AI chip vendors.
So, why rate the shares as a buy? I consider the company to be similar to that proverbial diamond bracelet not sold by Woolworth. And because of that, I believe it is in a position to exceed currently guided revenues and profits for the year ahead, and to maintain growth at or above 30% for some time to come. I am recommending purchase of GitLab shares at the current time and current price.
What is GitLab and what are DevSecOps tools
GitLab is probably the leading, although not the largest, vendor of software tools that are used to develop secure applications. The company started life as software to manage a universal problem in software development, that of version control. Over the years, GitLab has evolved its offering. One of the keys to its success is that its tools are built on a single platform-the issue that many other vendors of legacy products wrestle with. The basic raison d’etre of GitLab is to offer organizations a way to consolidate their use of DevOps tools. It has been said that some FIs have as many as 170 DevOps tools. That seems extreme, but the vast preponderance of organizations do wind up using between 2 and 10 DevOps tools. The main reason for the proliferation of software development tools is that there are multiple stages in a typical software development process. These include planning, creation, integration, verification, deployment, governing, monitoring, and improving. All the while, these days, security is a significant consideration. In fact, my understanding is that security and compliance these days have become the #1 factor that differentiates GitLab from competitors. Many of the company’s largest wins this quarter and in recent quarters have been based on the unique security components of the GitLab DevOps platform.
These days of course, the use of AI to optimize workflows is a key tool to improve productivity. Most software development is actually not about developing software but is about administering the workflow of the development process. This has become a key component of the GitLab value proposition. GitLab has just begun to offer Duo which is integrates AI throughout the software development life cycle. I will return to looking at Duo later in this article.
Overall, GitLab suggests that the use of its platform has an ROI of 427% for revenue generating applications. I am not a shill for GitLab and I have long and sometimes painful experience with putting together software purchase payback analysis. But it isn’t really necessary to use some claim of 427% ROI to understand the value proposition here. GitLab does enable users to consolidate software vendors. In turn, the use of a single platform winds up creating a better and more productive user experience, it obviously decreases the number of tools being used which concomitantly lowers integration costs. That leads to faster cycle times, which allow for faster incremental revenue generation.
GitLab had seen very rapid growth until the growth slowdown in the software industry bit. Much of this has been a function of the evolution of the product. 5 years ago, GitLab was basically known as a company providing source code management tools along with tools for integration and deployment. Currently the company offers tools for almost all of the functions required to create, secure, deploy, monitor and govern new software applications.
Given the breadth of the offering, it isn’t terribly surprising that GitLab’s addressable market has been projected to be $40/$50 billion. The GitLab growth opportunity is essentially based on the Gartner projection that over the next 5 years, users will switch to a platform approach for software development tools. Gartner projects that use of DevOps platforms will rise from about 25% currently to 75%. Gartner also rates GitLab as one of 3 leaders in its Magic Quadrant along with Microsoft (MSFT) (GitHub) and Atlassian (TEAM) (Bitbucket). In the past I have recommended JFrog (FROG) which competes in this space. Gartner rates JFrog as a challenger, mainly because its solution is more focused on a particular niche, rather than providing a holistic approach to the challenge of DevSecOps. GitLab was the only leader in Forrester Wave analysis of integrated software delivery platforms.
The company has a number of SKUs. Like many other software vendors of this scale it has pivoted hard to the enterprise, and its Ultimate tier is its fastest growing offering. By this time, the cloud version of its platform has become the dominant revenue source. It recently began to offer Enterprise Agile Planning which is designed as an alternative to Atlassian’s Jira, and to monday.com’s fairly recent offering in this space. In the latest conference call, the CEO called out a major displacement of Jira. It is hard to call a trend at this point but taking even a few points of share from Jira would be meaningful in terms of a growth tailwind for this company (as well as a conspicuous headwind for Atlassian.)
At this point, about half of the Fortune 100 are GitLab customers including UBS, Goldman Sachs, Lockheed, T-Mobile, Nvidia, Siemens and Airbus. GitLab has a quintessential land/expand selling motion, although the trend is for lands to increase in size. The viral spread of GitLab within large organizations such as the customers listed above has enabled the net expansion rate to return to 130% this most recent quarter, a signal achievement in the enterprise software space.
GitLab’s Competition and Differentiation
GitLab’s most notable competitor is GitHub which is owned by Microsoft. Atlassian is also a competitor along with offerings from the hyperscalers such as Azure and AWS. Jenkins is a well-known open source tool. I have linked here to a 3rd party analysis of the major alternatives to GitLab.
Gartner believes that GitLab has competitive advantages in term of native security, its open platform approach, and it emphasizes the company’s single platform. The offerings from the hyper-scalers have limitations of various kinds, and of course they have no on-prem capabilities and are said to lack certain security features. Atlassian is also listed as lacking some native security capabilities and is judged to be wanting in integration and deployment features. It will no longer offer an on-prem version of the product.
Microsoft has two competing DevOps platform and that confuses many prospective customers. Again, perhaps surprisingly, GitHub does not conform to international data residency requirements, limiting its utility for large multi-national enterprises. It also is said to lack some analytic metrics that are in widescale use.
GitLab offers an SKU called GitLab Dedicated. It is a single tenant offering designed specifically to comply with emerging Federal regulations regarding data isolation and residency. It is a niche product but has seen some early success and is said to be a unique offering that has both on-prem and SaaS capabilities. It has some initial high-visibility users such as Southwest Airlines and has significant potential.
While I don’t purport to have the skill set to suggest I know which DevOps tool is better, it seems fairly straightforward to suggest that 3rd party analysts find the company’s emphasis on security and on a single platform approach resonate with users.
When evaluating competition, one element is product functionality and the other is sales execution. At this point, the company has a three tier approach to its go-to-market strategy. It has a typical enterprise salesforce lead by Chris Weber who has extensive software industry experience. He was most recently at UiPath, and before that worked for several years at Microsoft.
But really the company CEO, Sid Sijbrandij is probably the best sales person on the GitLab team. Sid is one of the pioneers in terms of creating a DevOps platform, and then in adding features to make it a DevSecOps platform. He is considered to be an industry thought leader and he is perhaps the most effective industry evangelist. He is also a strong proponent of remote work, and GitLab is a virtual company, so-called.
GitLab’s involvement with AI
Selling software these days often starts by a discussion of how a solution set might advance the AI strategy of a customer. And most investors and analysts want to understand how a company, any company is going to monetize their AI initiative. GitLab introduced Duo Pro as a commercial product about 2 months ago. The company called out a few early users such as NatWest, Ultragaz and Magic Leap (an augmented reality headset vendor).
Perhaps the key component of Duo is that of its Code Suggestions feature. As the name implies, the feature helps users write code. Another key feature will be Chat. Chat is a feature that helps programmers identify useful information in text and then generates text and code in a conversational manner. It is still in beta.
At this stage it is really impossible to try to evaluate the efficacy of Code Suggestions. There is the comment from the conference call quoted below. Code Suggestions is the kind of AI functionality that can be game changing. The desire to automate the code creation process dates back decades. If Code Suggestions and Chat, another key part of Duo offering are successful in real-world environments, than the revenue guesses I have made for this product will prove to be ultra-conservative, and in turn that will mean that growth estimates for GitLab will ultimately be positively revised. This is a key part, although not the only part, of the positive investment case for this company.
Other features of Duo beyond Suggestions and Chat include Documentation Summary and Issue Description Generation. The tool also has a feature called Vulnerability Explanations that is designed to remediate vulnerabilities efficiently and to write more secure code.
Many of the features of Duo are still in beta or are being developed by the company’s research staff. On the other hand a report from Omdia Market Radar suggest that what is available is more comprehensive and functional than what can be obtained from other DevOps competitors. I have provided a link for readers who want to read the report themselves. The report is very much an endorsement of Duo as a market leader with advantages in terms of privacy protection, automating tasks beyond coding, and the conversational capability of the tool and security features. Duo is considered to be the most transparent of the tools currently available.
At this point, it seems that 2024 will be a year of more experimentation and testing of Duo than large scale deployment. That is likely to be the case for most AI offerings. Most users are going to test the efficacy of the Code Suggestions feature. That said, because the ROI can be so elevated and the interest in AI and development automation is so high there will be some large scale deployments but the revenue impact probably will be more notable in the second half of the fiscal year. The following is a quote from the recent conference call:
Another example is a major telecommunications company in Asia that was looking to boost productivity with AI-powered features, not only in coding but across the entire software development life cycle.
After testing Code Suggestions for one month and seeing positive results, in Q4, the company invested in thousands of GitLab Duo licenses to improve engineering productivity.
While Duo is a separately priced SKU, currently offered at $19/month, it is likely to have the additional revenue impact of driving user adoption of the higher tiers GitLab offerings-particularly the Premium and the Ultimate tiers . Much of the functionality of Duo is only available to users already using the higher functional tiers of the software.
Currently GitLab has 30 million registered users, and 1 million active license holders. Duo is only available to the Premium and Ultimate tiers of GitLab users. At the current price, it seems that a reasonable guess might be that GitLab Duo might add something like $30-50 million to revenue next year. That is less than a 20% attach rate. That is not a huge bonanza for a company that should exit the current fiscal year with a revenue run rate of greater than $800 million.
But the real revenue impact is likely to come from the cohort of 30 million users who are currently using the company’s free tier and do not generate revenue for the company. In order for them to use AI they have to go to the Premium tier which costs $29/mo. The potential revenue impact from accelerating migration from free to Premium can obviously be substantial and should figure into any growth expectations for the company.
That said, it would be nothing more than a guess on my part, or on the part of anyone else, even including the company’s own executive staff, to try to provide explicit quantification. Self-evidently, at a total cost of $58/month or about $700.year billed in advance, the impact of significant migration would have an outsize impact on GitLab’s revenue and that is not an insubstantial component of the investment case for the shares.
GitLab’s Competitive Position
GitLab has enjoyed a leadership position in its space since the space first started to develop about a dozen years ago. But this is a large space-the CEO says the current TAM for what GitLab sells is $40 billion and other 3rd party analysis reports the TAM to be $50 billion, and numerous vendors are vying for share. The fact that GitLab has a platform and what is probably the most complete solution is a major selling point for the company. But these days, the company’s security focus is driving lots of business as well, as its Enterprise Agile Planning offering. One of the more interesting data points that was mentioned on the latest conference call was a competitive displacement of Atlassian’s Jira. The customer upgraded to GitLab’s Ultimate tier and moved their sales team from Jira to GitLab Agile Planning. That is a huge price uplift-Ultimate costs $99/month and Jira costs $16/month. Of course this is one customer and one engagement, but Agile Planning is certainly an opportunity not currently considered in the current revenue growth forecast that GitLab made.
I have linked here to Gartner’s evaluation of the most important GitLab competitors. By far the most important GitLab competitor is GitHub, part of Microsoft’s software offering. It is, and will remain, the 800 lb. gorilla in the room. I have linked to a blog that is about the relative differences and advantages of GitLab and GitHub. There is no showstopper in the analysis. GitLab costs more and has some additional features. Security and agile planning are differentiators. As the following link from the Gartner magic quadrant portrays, the two leaders in the DevOps space are GitHub and GitLab, with Atlassian shown slightly behind.
In today’s environment security and AI are trump cards. GitLab appears to be a leader in those categories, and thus it seems reasonable to believe that it will continue to grow more rapidly than the market as a whole. Currently, most forecasts for the CAGR of the DevOps market are around 20% for the next 5+ years. The growth of the DevSecOps market will be faster, and at this point no one really knows what the impact of AI might be on expected growth.
The GitLab Business Model-Some Puts and Takes
Last quarter GitLab achieved non-GAAP operating margins of 8%, by far its most profitable quarter as a public company. The company improved its non-GAAP operating margin by 1900 bps year on year from an 11% non-GAAP operating loss margin to the aforesaid 8% margin. Non-GAAP gross margins reached 92%, up 200 bps from year earlier results and up by 100 bps sequentially. The company was free cashflow positive, both for the year, and for the quarter. The free cashflow margin for the year was about 6% compared to a cash burn margin on the same basis of almost 20% in the prior fiscal year. The improvement in the free cashflow margin was 2500 bps in a year, quite substantial by most standards.
The company executed a layoff about a year ago, and much of the improvement in opex ratios has stemmed from that restructuring. Overall, non-GAAP operating expenses rose by 18% year on year in the latest quarter while revenue growth was 33%. On a sequential basis, opex rose by about 4.6% while revenue rose by more than 9%. For the full year, the company reported a non-GAAP operating margin loss of 0.3%, compared to a non-GAAP margin of 23% in the prior year.
The company’s guidance, which brought the shares down to a more reasonable valuation was, to say the least, more than a bit puzzling. The company has forecast that its full year operating margin will be 1%. It called out the all hands meeting as a reason for the guide; the all hands meeting based on a $15 million cost is a 2% point headwind to non-GAAP operating margins. The company also indicated that it was starting to hire again for some roles in sales and marketing and in research and development. The company called out the net loss of its consolidated Chinese joint venture but then indicated that the loss would actually decline from $18 million last fiscal year to $15 million. So, it actually is a tailwind in terms of a year on year comparison.
Last quarter, non-GAAP opex was about $137 million. In order for non-GAAP operating income + the cost of the meeting to reach guided levels, quarterly opex would have to average $163 million based on a revenue estimate of $730 million and a 92% gross margin. That is a fairly steep ramp in terms of opex growth-about 8%/quarter. I find myself simply not believing that the company would ramp hiring at a cadence that would take operating expenses to an average of $163 million after laying off 7% of its staff a year ago. It seemingly would make little sense to ramp hiring, while at the same time forecasting a contracting level of sales growth.
What about sales growth? The CFO called out the following factors in the current guide:
There are a number of drivers we believe will fuel our business in FY’25, which we have included in our guidance. At our core, we see that continuing to deliver customer value with our DevSecOps platform aligns our success with our customer success.
Additionally, in April last year, we raised the price of our Premium tier for the first time in five years. Thus far, customer behavior has been in line with our expectations, and we expect to be $10 million to $20 million of incremental revenue in FY’25.
Another driver is GitLab Dedicated. GitLab Dedicated allows us to serve companies in highly regulated industries with complex security and compliance requirements. We continue to sign large enterprises on Dedicated.
For example, a leading US airline expanded on Dedicated with a seven-figure deal during Q4. The final driver for FY’25 is the monetization of our AI capabilities. GitLab Duo Pro is now in the market at $19 per user per month.
I would mention some other factors that caught my attention. One of these is the growth in cRPO which grew by 40% year on year and is now $430 million. This is obviously a significantly elevated coverage ratio in terms of backlog as a percent of forecast revenue. Another was the dollar based expansion rate which rose a bit to 130% last quarter. Remember that expansion rates are calculated on a 12 month moving average. It is a bit hard to imagine an expansion rate remaining at 130% with total revenues rising by 26%. It could happen, of course, but it is not the most likely scenario.
But beyond the math, there are certain qualitative assessments that lead me to believe that revenue growth this fiscal year will tend to stabilize rather than decline.
Yes. Absolutely, Rob. Thanks for the question. We are seeing customer buying behavior normalize with particular strength in enterprise. This showed up in our numbers this quarter. A couple of examples I’ll go through. One is we’re seeing strong expansion within the existing customer base. With dollar based net retention, we had an uptick up to 130% from 128% last quarter. Churn and contraction also continues to improve. It’s even better than rates that we saw six quarters ago.
Again, it is hard to imagine that churn and contraction are improving, and that buying behavior is normalizing with particular strength in the enterprise but that revenue growth rates are contracting. 6 quarters ago GitLab was reporting revenue growth of 74% and had a record quarter for new customer adds. While RPO statistics are obviously impacted by multi-year deals with large enterprises, they are certainly suggestive that revenue growth is not likely to contract sharply. The CEO called out the Ultimate tier of the offering as increasingly important. The Ultimate tier costs almost $1200/year compared to $350/year for the premium tier. The fact is that the Ultimate tier is monetizing requirements for Ci/CD, an important benefit for most enterprises. And it also allows for a large storage workspace to facilitate the secure storage of necessary files. I have linked here to a more detailed discussion of the pricing tiers for those interested in the subject. I have also focused on comments from the CEO regarding the demand drivers for the Ultimate tier:
And you talk about security and Ultimate, we have the most comprehensive security offering of any DevOps platform that allows us to also release more AI features. And some of these features are not in Duo Pro, but they’re part of Ultimate. So Ultimate now has more and more AI features. So AI is helping to drive Ultimate as well because Ultimate, the number one reason why people by [buy] that is because it helps them get more secure and every feature that is in Ultimate and that is now getting enhanced with AI that AI we give to the customers of Ultimate by default.
I don’t have the tools to model GitLab revenue by tier. About 20% of the net expansion is being driven by tier migration, and that percentage is showing some increase. Finally, at least in my experience, companies that are showing substantial sales momentum tend not to see revenue growth percentages contract. This is another quote from the CFO as to the state of bookings last quarter.
No, it’s more going forward. Very happy with the bookings this quarter. We had the largest bookings quarter in company history. There is many first within the quarter. Largest hyperscaler contribution, largest first order, largest Ultimate, and we had a greater number of $1 million-plus deals. There was some linearity in the quarter. Things came more back in, in the quarter than expected.
Of course this was a fiscal Q4…but that said, bookings were substantially greater than planned and that usually sets the table for strong percentage sales growth in subsequent quarters.
Many of the analysts on the call challenged both the margin and revenue growth guide. All I can say is that I was left with more than a bit of cognitive dissonance, in considering the entire span of margin and revenue guidance.
Of course I like it when companies are conservative, and I like it more when that conservatism shows up as the consensus. I get it that RPO balances are but one measure of sales momentum. But the combination of all of the items cited would seem to suggest that the company ought to at least maintain the most recent cadence of growth.
A year ago the company had forecast that its revenues would be $530 million, and that its non-GAAP operating loss would be about $62 million. Actual results for the year were revenues of $580 million, and a non-GAAP operating loss of about $1 million. While I don’t expect that results for the current year will exceed the company’s forecast by a similar magnitude, I do expect a decent level of over attainment. This year, the forecast, according to the CFO, is supposed to be based on a less conservative methodology. But exactly how that methodology squares with some of the quantitative commentary has not been reconciled, at least for me.
In looking at valuation, it is worth noting that the company uses stock based compensation. Last quarter, stock based comp was 26% of revenues, compared to 28% of revenues in the prior year quarter. When I look at valuation, I account for SBC by considering dilution, the actual cost of that compensation. Dilution was around 4.3% over the last year and the company is forecasting a similar level of dilution over the next year. In order to be conservative, I have used a weighted average share count over the next 4 quarters that is 2% greater than the company projection.
Wrapping Up-The case to buy GitLab shares at the current time
GitLab stock stumbled in the wake of guidance for the current fiscal year that was below consensus with regards to profitability and just met expectations with regards to revenue growth. The shares have fallen about 22% from the levels at which they were trading before the earnings release. This hasn’t made the shares cheap-but cheaper. The EV/S is now 11.5X. I have projected a free cash flow margin of 9% over the coming year. That brings the shares to a valuation that is less than CrowdStrike, Datadog and Snowflake but is greater than Zscaler (ZS).
The company is and has been the leader in the DevSecOps space. Its AI initiatives are considered to be the most comprehensive and effective by a 3rd party research form. It has been able to raise prices and that is continuing to be a tailwind to its gross margins. Besides its AI initiative, the company has additional SKUs such as agile planning that is apparently beginning to displace Atlassian Jira in some situations.
Many indicators of the sales environment have apparently returned to conditions of 6 quarters ago when the company saw a step down in buying behavior with increased churn and declining net expansion. Given the improvement in the sales environment, the strong booking momentum last quarter and a significant array of new products including the company’s AI Duo offering, I think growth this year will be significantly above the 26% level the company is forecasting. And I also think operating margin growth will be above the minimal levels forecast.
I have taken a small position in the shares at this point. I recognize that in the short term, the shares will trade as a function of the risk on/risk off bias of the market. But I think this is a reasonable entry point and I expect the shares to generate significant positive alpha over the next year.
