UiPath’s AI robots could trigger its tipping point in 2024

UiPath stock price

Key points

  • UiPath is the leading provider of artificial intelligence (AI) software robots for robotic process automation (RPA) and business process automation (BPA) solutions.
  • UiPath has integrated and infused AI into its tools, driving annual net dollar retention rates to 121% and ARR growing 24% year-over-year.
  • UiPath is generating net losses and has a short interest of 7.4%.
  • 5 titles we like most about UiPath

UiPath Inc. NYSE: PATH is the world’s largest provider of end-to-end robotic process automation (RPA) and business process automation (BPA) platforms. This business services company has integrated and infused generative artificial intelligence (AI) into its products, providing an even smoother and more intuitive experience for end users. Is generating real results from AI services that provide businesses with AI-powered solutions such as C3.ai Inc. NYSE:AI.

Simply put, UiPath’s software, composed of AI software robots, is designed to discover, extract, configure, optimize and automate processes specific to many industries, including healthcare, manufacturing, financial services and public sector. Its annualized renewal rate (ARR) had a compound annual growth rate (CAGR) of 35% from the first fiscal quarter of 2022 through the third fiscal quarter of 2024.

UiPath autopilot

As the name aptly suggests, UiPath Autopilot is a set of artificial intelligence tools that allow users to get more out of its business automation platform. These tools are tailored to talent to help automate specific tasks. For developers, Autopilot for UiPath Studios and UiPath Apps helps them build apps and workflows faster. Autopilot for UiPath Test Suite allows testers to generate test cases that ensure automation and reliable apps.

For analysts, Autopilot for UiPath Process Mining and Communications Mining helps them easily discover potential automation opportunities in as-is processes. Autopilot for Everyone helps anyone looking for help automating and completing time-consuming daily tasks. The company has an extensive, territorial strategy that continues to have customers add new services as its dollar-based net retention rate has grown to 121%.

Profitable and growing

UiPath posted its fiscal third-quarter 2024 EPS of 12 cents, beating consensus analyst estimates by 5 cents. GAAP operating loss was $56 million, while non-GAAP operating profit was $44 million. Revenue increased 24% year-over-year to $325.92 million, beating consensus estimates of $315.64 million. ARR increased 24% year over year to $1.378 billion. Its non-GAAP operating profit is expected to be approximately $78 million. Net new ARR was $70 million. GAAP gross margin was 85%. Non-GAAP gross margin was 87%. UiPath closed the quarter with $1.8 billion through October 31, 2023.

Online help

UiPath issued in-line guidance for the fiscal fourth quarter of 2024 for revenue of $381 million to $386 million versus analysts’ consensus estimates of $382.84 million. ARR is expected to be between $1.450 billion and $1.455 billion. Non-GAAP operating profit is expected to be approximately $78 million.

Comments from the CFO

UiPath CFO Ashim Gupta commented: “Our relentless focus on operational excellence has once again translated into strong revenue growth and year-over-year improvements in profitability and cash flow,” he continued Gupta. “Given the strength of our business model, we expect to balance growth and profitability by investing in the business to position UiPath for long-term success.”

Analyst reactions

BMO Capital Markets has a Market Perform rating on PATH shares with a $24 price target, citing higher free cash flow estimates and greater belief in growth potential driven by diversified process, business and communications portfolio tools. Non-RPA solutions can improve win and abandonment rates for core RPA solutions. Morgan Stanley raised its price target to $17 from $16, raising its ARR guidance for full fiscal year 2024. RBC Capital Markets raised its price target from $19 to $24 and maintained its Market Perform rating. Analyst firm William Blair initiated coverage with an Outperform rating on January 2, 2024.

UiPath analyst ratings and price targets I’m on MarketBeat. UiPath peers and competitor actions can be found with MarketBeat Stock Screener.

Daily distribution chart of the rising wedge

The daily candlestick chart on PATH illustrates a rising wedge breakout pattern. PATH broke out of the daily market structure low (MSL) at $22.28 following the release of its fiscal third quarter 2024 earnings. Shares peaked at $26.53 as an ascending wedge formed composed of higher highs and higher lows with a narrowing price channel that ultimately triggered the breakdown when the lower ascending trend line broke to $25.41 on December 28, 2023.

PATH fell to a low of $21.49 on January 14, 2024 and triggered the MSL’s daily breakout to stage a rally to $24.40 as shares attempted to hold above daily moving average support at 50 period (MA) at $23.15. The daily relative strength index (RSI) is bouncing from the 50 band. The pullback support levels are at $22.28, $20.31, $19.34, and $17.82.

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