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UiPath Stock: Possible Promising Path to Profitability
Stock Analysis & Ideas

UiPath Stock: Possible Promising Path to Profitability

Story Highlights

You can either try to resist the software-robot revolution, or you could potentially ride it higher with a stake in UiPath stock. The company’s financials aren’t perfect, but UiPath has a vast global presence and is helping its clients streamline their processes through robust automation technology.

New York-based UiPath (PATH) provides a robotic process automation (RPA) solutions platform. I am bullish on the stock.

The word “automation” will scare some people, while appealing to others. More businesses are turning to machines as they can often complete tasks quickly and cost-efficiently without becoming fatigued. Admittedly, this isn’t great news for people who might lose their jobs due to automation.

On the other hand, there are businesses that can generate strong revenue by helping companies with their adoption of automation. UiPath does this, but not by providing the types of robots you might see in movies. Rather, UiPath provides robotic process automation or RPA, which “makes it easy to build, deploy, and manage software robots that emulate humans actions interacting with digital systems and software.”

It’s a controversial business to be in, since some folks may be opposed to automation. That’s fine; but as an investor, it’s important to focus on reality and concrete data. If UiPath can achieve measurable results for the company’s clients while demonstrating top-line financial growth, then perhaps skeptical investors can set aside their feelings about the robot revolution and give UiPath stock a chance.

On TipRanks, PATH scores a ‘Perfect 10’ on the Smart Score spectrum. This indicates a high potential for the stock to outperform the broader market.

Quantifiable Improvement

If you’re in the market for a growth stock with a terrific track record, then UiPath stock might disappoint you. The stock is far below its 52-week high of $72.90 and recently traded under $20 per share. Clearly, it’s not appropriate to pour your entire investment account into UiPath stock, as it could continue to lose value.

Yet, the stock could stage a recovery if more businesses adopt RPA. Companies may come to embrace this technology as UiPath’s RPA software can automate repetitive, high-volume tasks (filling in forms, moving files and folders, completing routine reports, and so on). Employees might appreciate the software as well, as it could enable them to focus on more creative and engaging tasks.

Here’s a real-life example of what this could look like in a business setting. One of UiPath’s UK-based clients is a company called CXP, which provides outsourced contact centers. With UiPath’s help, according to CXP Commercial Director Stephen Coia, “We’ve managed to cut 10-minute interactions to six minutes.” Consequently, “customers can resolve their query quickly and our clients benefit from efficiencies.”

Plus, CXP has more positive data to report. The company “now has 14 robots undertaking 158,400 tasks, handing back 13,200 hours to staff, increasing accuracy by 18%.” Just think of the burden, in terms of financial and human capital, that CXP would incur if the company didn’t automate those tasks. Furthermore, the CXP example is just one of UiPath’s many case studies demonstrating the power of RPA.

A Significant Opportunity

Not only does UiPath have numerous satisfied clients, but those clients are spread across multiple regions. As CFO Ashim Gupta clarified, “One of UiPath’s strengths is our global presence, as we operate in more than 100 countries which gives us diverse perspectives and access to talent.”

Gupta also assured UiPath’s stakeholders that “The automation market is large and growing,” and that the company’s “financial model and strong balance sheet position us well in the current macroeconomic environment.” The CFO’s confidence is encouraging, but of course, informed investors must delve into the data before making any investment decisions.

Fortunately, there are enough data points to paint a positive fiscal picture for UiPath. During the first quarter of Fiscal 2023, UiPath grew its revenue 32% year over year to $245.1 million. This result beat the $225.3 million that analysts had expected, according to survey data from FactSet.

UiPath also exceeded the analysts’ prediction of a quarterly annualized renewal run rate (ARR) of $965 million. The actual ARR turned out to be $977.1, up 50% year over year.

Looking ahead, UiPath expects to generate revenue in the range of $229 million to $231 million during the 2023’s fiscal second quarter – a realistic objective that UiPath should be able to meet or beat. Also, UiPath anticipates ARR in the range of $1.04 billion to $1.042 billion as of July 31, 2022. It appears, then, that the company is confident in its ability to deliver another solid quarter of results.

The area in which UiPath could improve is the company’s bottom-line results. UiPath’s quarterly net loss of 3 cents per share beat Wall Street’s expectation of a 5-cent per-share loss, but hopefully, the company will flip to profitability in its upcoming quarterly reports.

Wall Street’s Take

According to TipRanks’ analyst rating consensus, PATH is a Moderate Buy, based on 13 Buy and six Hold ratings. The average UiPath price target is $30.24, implying 63.95% upside potential.

The Takeaway

Is RPA creating problems or opportunities? You can certainly engage in a debate over this question, but investors shouldn’t try to fight a losing battle against the automation movement. Instead, you may choose to take a position in UiPath stock as numerous clients turn to the company for best-in-class RPA solutions.

In time, UiPath stock might finally turn north and reward its loyal investors. Until then, there’s risk involved but also the prospect of tremendous upside if UiPath pivots to profitability while continuing to grow its global client base.

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