UiPath (PATH) develops and markets Robotic Process Automation (RPA) software to provide a digital workforce that can automate operational activities for businesses. While it was founded by automation experts Daniel Dines and Marius Tirca in Bucharest, Romania, PATH is currently headquartered in New York City.
Today, UiPath has almost 3,000 full-time employees. UiPath has been deployed in several industries, including finance, insurance, and banking. The technology is built on NuGet, the package manager from Microsoft. The programming languages used are C# and Visual Basic.
I am neutral on UiPath as it has a strong competitive position, Wall Street analysts are generally bullish on it, and its average price target implies substantial upside potential over the next year. However, the company is still a long way from profitability, so it remains highly speculative.
Strengths
The market size for RPA software is expected to reach $13.74 billion in 2028, and UiPath sits at the helm of the industry. The growing labor shortage and supply chain disruptions, mostly due to the pandemic, are driving demand for RPA software. UiPath has been identified by experts as a leader in robotic process automation in terms of its market presence and quality of products.
One of PATH’s biggest clients, Nielson, started with 20 robots in 2018 and acquired more than 200 robots from UiPath. According to UiPath, its total addressable market is valued at nearly $60 billion.
Recent Results
UiPath is growing at a rapid pace and realized an annualized renewal run rate of $818 million in the fiscal third quarter, representing an increase of 58% year-over-year. It also generated revenue of $220.8 million, an increase of 50% year-over-year.
Valuation Metrics
PATH stock is a bit difficult to value because the company is currently not profitable on neither a GAAP nor an EBITDA basis. The company needs to continue growing rapidly in order to generate the economies of scale necessary to turn a profit.
That said, Wall Street analysts expect the company to generate positive EBITDA in 2022 and beyond, albeit a very small amount until 2026. Nevertheless, analysts expect revenue to grow at a 31.3% CAGR over the next four years, which should help it achieve the necessary economies of scale to begin turning meaningful GAAP and EBITDA profits by 2026.
Wall Street’s Take
According to Wall Street analysts, PATH stock earns a Moderate Buy consensus rating based on 13 Buys, five Holds, and zero Sells in the past three months. Additionally, the average UiPath price target of $63.11 puts the upside potential at 73.5%.
Summary and Conclusions
PATH stock operates in a very exciting and innovative space that, if successful, could revolutionize work and generate tremendous wealth for millions of people. That said, the business itself is quite speculative.
While Wall Street analysts are generally bullish on the stock and the average price target implies massive upside potential, the company is not profitable at the moment, and it is expected to take another four years before it is generating substantial profits for shareholders. As a result, investors will have to be very patient when holding this stock and could be in for a volatile ride.
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