Bull of the Day: UiPath (PATH)
UiPath (PATH) is a Zacks Rank #1 (Strong Buy) that offers an end-to-end platform for automation, combining Robotic Process Automation (RPA) solutions for digital business operations.
The stock is well off the post-IPO highs it made back in 2021, but the bulls have started to come back into the name after some strong earnings reports. With PATH up over 100% off the 2022 lows, the question is if there is any more meat on the bone for the rest of 2024.
About the Company
UiPath has an interesting background that started in 2005 with ten people working in a small apartment in Bucharest, Romania. The company now employs over 3,800 people and has a market cap of $13 billion.
The stock has a Zacks Style Score of “B” in Growth and “A” in Momentum. It sports a Style Score of “F” in Value, with a Forward PE of 40.
UiPath provides a robotic process automation (RPA) platform that uses AI to automate repetitive tasks and streamline business operations.
In case you are not yet aware, RPA is a technology that allows businesses to automate repetitive and rule-based tasks by using software robots, often referred to as "bots." These bots can mimic human interactions with digital systems, such as navigating through user interfaces, interacting with applications, and performing data entry.
Q4 Earnings
Since the IPO back in 2021, UiPath has never missed on earnings. The company continues to beat expectations and in March reported a 47% EPS beat, which brought the earnings winning streak up to twelve.
Fourth quarter operating income came in at $110.5M v $69.2M last year. And revenues were $405M v the $383M expected.
PATH achieved GAAP profitability and Annual Recurring Revenue (ARR) was up 22% year over year at $1.46B.
While the Q1 guide came in slightly below expectations, ARR is expected to come in at $1.51B.
Estimates Rising
Analysts were positive after the quarter with many hiking estimates and price targets. Bullish analysts cite ARR growth, GAAP profitability, and RPO growth as reasons to buy the stock.
The company is seeing earnings estimates slowly turn higher over the short term but accelerate for the current year.
For the current quarter, numbers have gone up 10% over the last week, moving from $0.10 to $0.11. For the current year, estimates have gone higher by 16% over that same time frame, moving from $0.49 to $0.57.
Let’s go over some analyst price targets:
-Truist lifted estimates and raised its price target from $28 to $32.
-Mizuho Securities reiterated PATH with Neutral, lifting its price target to $25 from $22.
-BMO Capital Markets reiterated PATH with Market Perform, with a price target of $28, up from $24.
-JPMorgan raised PATH with Outperform l, bumping its target to $28 from $22.
There were a lot of targets being lifted after earnings, with most being in the $25-30 range.
The Technical Take
Looking at the technicals, the stock has struggled since the IPO in 2021 but has recently started to show some major life.
In the Spring of 2021, UiPath priced its IPO at $56. There was much excitement about the stock and it surged to $69 on its first day of trade. After topping out at $90, the stock saw a steady decline, eventually falling to a low of $10.40 in late 2022.
Since that low, the stock has bounced over 150% but has since traded sideways. The recent earnings report did not give investors enough to justify the valuation so the stock went from green to red after the report.
While the stock is currently trading below the 50-day MA, the $22 level has been held as support. If the level were to break the 200-day is at $19.50.
Additionally, a 61.8% Fibonacci retracement resides at $19.75 and a move to this level would be a gap fill from the earnings reported in Q4 2023.
If the stock came into these levels and held, investors would want to pounce. If the bulls do not allow this entry, investors might have to chase the stock if it gets back over $26. The $30 level provides multiple Fibonacci targets.
In Summary
The last couple of years have been tough for UiPath investors. Since the IPO, the stock is still down over 70% from those post-IPO highs.
However, there are now many reasons to be bullish on this AI play.
The AI momentum will accelerate throughout the year, which will help revenues and earnings growth in 2024. With that, the stock has a lot of room to run if it can continue to grow into the valuation.
If the company can continue to beat earnings expectations, the bulls will likely take the stock to $30 and beyond. In the meantime, investors should be looking for entry points before the stock continues its uptrend.
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UiPath, Inc. (PATH) : Free Stock Analysis Report
