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UiPath Feeling Market’s Wrath; Shares Keep Declining
Stock Analysis & Ideas

UiPath Feeling Market’s Wrath; Shares Keep Declining

Since going public in April of last year, automation software expert UiPath, Inc. (PATH), has been on a roller coaster ride of price action. The stock has lost approximately 68% of its value over the last year.

The company produced strong numbers last week, with both the top and the bottom-line figures exceeding the consensus estimate. In addition, UiPath reported strong metrics growth, with ARR (annual recurring revenue) increasing by 59%.

However, UiPath provided weak forward guidance, causing the stock to plummet. The forecast signals that the growth curve is trending in the wrong direction.

UiPath Growth Rate is Slowing

According to the fiscal fourth-quarter results, overall sales grew 39% year-over-year to $289.7 million. However, the growth rate slowed from 50% in the prior quarter.

In the meantime, non-GAAP earnings of $3.37 per share were down 44.4% year-over-year, which was disappointing.

While UiPath’s automation solutions should gain traction in the near future, the findings suggest that competitive challenges and delayed adoption of its solutions remain concerns.

Unfavorable Macro Conditions

UiPath operates in both Russia and Eastern Europe. The company has ceased operations in Russia due to the ongoing war in Ukraine. As a result of this suspension, UiPath estimates its ARR to fall by $15 million in the fiscal year 2023.

Second, UiPath earns roughly 30% of its revenue in Europe and is highly vulnerable to the dollar’s strengthening against the euro. According to the company, these currency headwinds are expected to impact UiPath’s ARR by $5-$10 million in the first quarter and another $20-$25 million in the fiscal year 2023.

Wall Street’s Take

On TipRanks, UiPath stock commands a Moderate Buy consensus rating based on 12 Buys and six Holds. As for price targets, the average PATH stock price prediction of $37.03 implies almost 67% upside potential from the current levels.

Bottom Line

While UiPath is the industry leader in robotic process automation, with a huge platform and tremendous scale, its slowing growth, execution challenges due to leadership changes, FX headwinds, and macro uncertainties due to the Russia-Ukraine conflict make it a risky bet right now.

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