Among the growth sectors investors are increasingly looking at for compelling plays is the robotics and automation space. We’ve all seen what Tesla (TSLA) is proposing with its humanoid robot that could become everyone’s favorite personal assistant one day. Indeed, the idea that robotics could drive significant demand from consumers and businesses everywhere isn’t far-fetched.
With this in mind, Wall Street focus has locked in on UiPath (PATH) as a pioneer in this space. The company’s focus is on utilizing software-based bots to automate the most menial, tedious, and time-consuming administrative tasks we just hate doing.
There’s a lot of value with UiPath’s business model. At least this valuation is implying a lot of value. While UiPath was able to raise $700 million through its IPO, since then, shares have underperformed the market.
I remain bullish on PATH stock from a long-term perspective. Let’s dive into why investors may want to take a look at this growth stock right now. (See UiPath stock charts on TipRanks)
Business Model Built for Long-Term Success
Business automation could well be the future, and UiPath’s role as a leader in the business automation market is attractive. This company creates RPAs, or bots, which help businesses clear out repetitive tasks to free up employee time.
Interestingly, human work automation is a controversial topic. Such bots effectively kill jobs. The idea of robots, or software automation in this case, replacing physical labor can be deterring to some individuals. However, it’s important to keep in mind that the tasks automated by UiPath’s RPAs are the kinds of tasks that companies generally want to avoid or limit employee time on to begin with.
The company’s automation software can’t yet automate the entirety of many roles. However, various accounts payable, accounting, document filing, and other menial tasks can be handled by UiPath’s platform.
Given the shortage of human capital that already exists for many hyper-growth companies, automating away the bottlenecks in administrative processes sure sounds like a profitable idea.
The future is here, and UiPath is at the cutting edge of a technological transformation that could change our workforce for good. At least, the company and its shareholders believe so.
Incredible Growth Comes with Great Expectations
UiPath reported some strong numbers this past quarter. The company brought in annual recurring revenue (ARR) of $726.5 million this past quarter. This handily beat guidance and suggests the company’s growth trajectory is intact.
Furthermore, the company raised its full year guidance for ARR to between $876 million and $881 million, which would reflect 21% growth.
That said, PATH stock has not yet caught on among growth investors. There happen to be other hyper-growth plays that are generating more attention right now. However, should the company continue to beat expectations and provide the growth the company says it will, there’s a decent likelihood this is a stock that can take off.
What are Analysts Saying?
As per TipRanks’ analyst rating consensus, PATH is a Moderate Buy. Out of 15 analyst ratings, there are 5 Buy recommendations, 9 Hold recommendations, and 1 Sell recommendation.
This stock has an average price target of $71.08, implying 32% upside potential.
Bottom Line
The AI industry certainly has the potential to become huge in the coming decades. Additionally, the funds that UiPath received from its IPO should help drive growth.
That said, PATH stock is still an expensive one. However, the company is expanding at a fast pace and shows great potential for future profits. Accordingly, PATH stock looks like a reasonable play for investors who have the patience to hold it for years to come.
Disclosure: At the time of publication, Chris MacDonald did not have a position in any of the securities mentioned in this article.
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