How High Could UiPath Stock Go?

The recent boom in artificial intelligence stocks has been compared to the craze of the 1990s, but there’s one important difference. Today’s investors have leaned on well-established favorites with AI upside, like Microsoft and Nvidia. They haven’t just bought anything with AI ties.

UiPath (NYSE: PATH), for instance, has been a central figure in robotic process automation (RPA), and AI, since it came on the scene in 2018. After the company’s initial public offering in 2021, PATH traded up to around $80 per share.

But the stock quickly fell as concerns over revenue, profitability, and competition ate away at investor confidence.

While interest is starting to rekindle for the company, and PATH is up over 19% in the past 12 months, the attention isn’t close to the enthusiasm other AI stocks have enjoyed. And since the beginning of 2024, the share price has fallen by over 18%.

UiPath has consistently beaten earnings estimates, including all four quarters of fiscal 2024. And in the 4th quarter, UiPath finally reached non-GAAP profitability.

Investors have long been concerned that some of the company’s software could become obsolete as generative AI progresses, but UiPath has insisted that AI will only strengthen the company’s products.

So what does the future hold for UiPath?

Why Did UiPath Stock Drop?

PATH had been rising until the company reported earnings for the fiscal 4th quarter of 2024 which ended on January 31, 2024. While there were several positives about the release, investors were concerned because the company forecasted lower revenue for the 1st quarter of FY25 than expected.

Analysts had predicted around $346 million in revenue, and UiPath only projected between $330 million and $350 million.

Still, the company notched record revenues of $405 million in the 4th quarter, up 31% from the same quarter of 2022. Annual recurring revenue of $1.46 billion was a 22% improvement year-over-year.

Uipath’s non-GAAP gross margin of 89% fueled the company’s breakthrough to profitability for the first time as a public company.

The company had a net cash flow from operations of $146 million and ended the year with $1.9 billion in cash and cash equivalents.

Overall, it was a very strong quarter for UiPath, with revenue beating estimates by 5.6% and earnings exceeding expectations by over 39%.

Yet UiPath shares still dropped by over 20% since the March earnings release, a sign that investors are still apprehensive about the stock, and management lowered guidance for the upcoming quarter was enough for them to balk.

It’s still worth noting that the UiPath is only expecting a short-term revenue dip. For full FY25 revenue, the company expects between $1.55 billion and $1.56 billion, above the consensus estimate of $1.53 billion.

Will UiPath Stock Go Back Up?

If revenue picks back up over the course of the year, PATH share price is likely to resume its uphill climb. But there are other concerns still lingering with investors. Chief among them is the potential for competition from other RPA and AI companies.

UiPath is currently the largest RPA company in the world, with over 10,000 customers. The company’s products allow for the automation of repetitive tasks like data entry, invoicing, and email newsletters. That functionality was in high demand when workers were forced out of offices and staffing was short.

There are concerns, however, that RPA isn’t “true” AI. The software is a complex mapping process that records a series of movements, such as the steps to send a mass email, and then replicates them.

Concerns that AI will eventually reach the point that it surpasses RPA have mounted, and companies such as Interloom have already been touted as the next big thing.

UiPath has downplayed those assertions and repeatedly said that AI is an integral part of their solutions. The company pointed to its recent launch of the Autopilot companion as evidence of its AI capabilities.

UiPath has also pointed to its strong market position, with partnerships ranging from Heineken to Wells Fargo, as proof that it has staying power.

Analysts Ratings Are Upbeat

In spite of the expected revenue slowdown, Wall Street is still largely behind the stock.

Out of 24 analysts who have rated PATH, 13 rank it as a buy. Two of those analysts calculate the stock is set to outperform the market, and the highest forecast has PATH jumping by almost 65% to $32 per share over the next year.

The average forecast of $27.98 per share represents a 44.2% gain from where the stock currently trades. There isn’t currently a Sell rating on the stock though the lowest forecast for the stock is $24 per share, which still represents a 23.7% rise from where UiPath shares currently trade.

The remaining 11 analysts consider PATH to be a Hold. 

Is UiPath Stock Undervalued?

Wall Street seems to agree that the stock is somewhat undervalued. That’s backed up by UiPath’s price-to-sales (P/S) value of 8.37, which is lower versus the company’s three-year average P/S of 13.8.

PATH also appears to be trading at a discount compared to technology stocks at large, and certainly in comparison to other AI stocks.

Nvidia, for example, has a P/S multiple of over 35. Even with an $11.04 billion market cap, it seems UiPath still has room to grow.

How High Could UiPath Stock Go?

Analysts forecast that UiPath could rise by as much as 46.4% to $27.89 per share.

UiPath is an RPA and AI company that has a strong position in a unique market. One of the main concerns for investors is how long the company can maintain that positioning in light of heavy competition.

While revenue and earnings have consistently beaten estimates for the past year, the company has forecasted that FY25 Q1 sales will take a step backwards. Coupled with competition fears, that has been enough to keep investors on the sidelines.

However, UIPath has declared it will beat revenue forecasts before the fiscal year is through. For a company that is a global leader in an AI-powered field, PATH hasn’t captured investors’ attention of late. If it continues to grow revenue and prove its AI capabilities, UiPath could garner much attention in short order.

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