YB new stock pitches (Thu, Jan 12)

GitLab (GTLB) presents a compelling bullish opportunity, trading at just 6x EV/sales despite 27% growth and 20% FCF margins, making it an extreme valuation outlier in the SaaS space. While initially perceived as threatened by GenAI coding assistants like Cursor and Windsurf, these tools likely enhance GitLab's TAM rather than shrink it, as GitLab handles the post-code creation workflow including testing, securing, analyzing, and deploying. Management emphasizes the complementary nature of these tools with GitLab's platform. The company's DUO workflow (agentic AI for DevSecOps) is generating significant customer excitement and will reach general availability by year-end. Despite narrow earnings beats, lowest base customer adds as a public company, and a 1% sequential decline in NRR, GitLab benefits from solid 100k customer adds and strong federal performance. The stock offers 20% upside potential, with 50-100% possible if the narrative shifts, bolstered by multiple potential strategic suitors and an upcoming product event in two weeks.

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Silicom Ltd. (SILC), a provider of custom parts for cloud and telecom infrastructure, is trading at a 20% discount to NCAVPS following a severe revenue decline of 17% in 2023 and 53% in 2024 due to customer inventory gluts and reduced infrastructure spending. The stock presents an attractive risk/reward as the cloud and data center market shows signs of bottoming, evidenced by recent design wins worth $15 million expected to fully ramp by 2026, driving 25% year-over-year growth. Despite maintaining elevated R&D spending (essential to preserve competitive positioning), SILC projects a return to profitability by 2027, potentially generating $11 million in EBITDA and $2 FCF per share by 2029. At an 8x EBITDA multiple, this yields a $38 price target for 2029, representing a 24% IRR from current levels. Key risks include prolonged economic uncertainty delaying business investment, limited insider ownership (chairman owns only 5%), decreasing stock liquidity, and potential industry competition that could compress margins and reduce design win success.

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Rogers Communications (RCI) is trading at cyclical lows (6.8x EV/EBITDA, lowest P/B ever, highest earnings yield since 2013) with multiple catalysts ahead: 1) potential monetization of its 75% MLSE stake valued at approximately $15 billion, which management is actively exploring with institutional investors; 2) significant leverage reduction via the upcoming $9 billion Blackstone equity deal, which will reduce debt by a full 1x turn and make Rogers the least leveraged Canadian telecom; and 3) the likely end of the telecom price war that has compressed ARPU to $56.94/month (down from $57.95). Despite serving 38.3+ million subscribers in a growing Canadian market with continued population growth (nearly 1 million new Canadians in the first half of the year), the stock remains ignored by most investors while 'smart money' institutions including Fidelity, Purpose Investments, and Anson Funds have been adding positions. The company is completing a capex cycle for 5G network buildout, which should improve margins as year-over-year capital expenditures decline.

Read the full article here. Read time: 8 min