Is UiPath Stock (NYSE: PATH) Set To Deliver On Early Promise As Earnings Loom?

The realm of artificial intelligence (AI) has presented dazzling opportunities for growth, and Nvidia has been at the forefront, securing its position as a leading name with its high-demand graphics processing units (GPUs). However, Nvidia's colossal market cap of around $2.3 trillion paints a picture of a maturing giant, where the dreams of a 3x return may be more fantasy than a practical investment goal to anyone that didnt invest a year ago.

For those willing to look beyond the giants, and take on a little more risk, there hides some emerging names in the AI industry that might warrant consideration. Today we are looking at one of those potential names in UiPath.

To start with, UiPath stock price (NYSE: PATH) is down more than 70% from it's early heady days post IPO (April 21, 2021). With an initial list price of $56 shooting up to a shade under $80 just a month later, there was a lot of initial excitement around the firm which quickly faded. The next 12 months from May 28th 2021 highs through to 2022 brought a drop of 77% but since then, the company has turned a corner, and pushed on.

From the start of 2023 through today, PATH shares have added 70%, putting into perspective just how quickly things can turn in the sentiments of markets. With AI now being en vogue, it could be time for UiPath to really step up, and profitability is that first step.

UiPath Steps into Profitability

UiPath, with its enterprise automation and AI software, stands out with a significantly smaller but promising market cap of approximately $11.6 billion. Marking its first profitable quarter as a public company, UiPath has reported a year-over-year revenue jump to $405 million, an impressive 31% increase. With a dollar-based net retention rate of 119% and a striking gross margin of nearly 90%, UiPath's financial health appears robust.

Focusing its strategy on AI-powered productivity enhancement, UiPath offers innovative products like the Test Suite for application testing, delivering tangible, high-return benefits to its customers. This strategy is not just about short-term gains but is tailored for the long-term vision, especially considering that Ark Invest has estimated the AI software market could balloon to a staggering $14 trillion by 2030, growing at a compound annual growth rate of 42%. This growth is expected to be driven significantly by productivity enhancements, positioning companies in the sector to take full advantage of this expansion.

UiPath's strength in the AI automation market is evident through its extensive partner network comprising giants like Accenture, Deloitte, EY, PWC, and SAP. CEO Robert Enslin emphasised in a recent earnings call that over 70% of UiPath's deals are made in conjunction with these partners, highlighting the efficacy of its collaborative network and its potential for sustained growth. Whilst this high quality partner base is a great thing to have, there is also the element of concentration risk surrounding revenues to these names that needs to be considered.

Analysts Have Their Say

The analyst community seem to have positive sentiment surround UiPath, with nothing but raises coming in over the past couple of months. Since the last earnings on 13th March where the company beat revenue expectations by $20million, there have been more than 15 raises in price target on PATH that strangely enough, have coincided by an almost 20% dip in share price.

The consensus target on the street of $27.50 is significantly more than 35% higher than the last closing price, but this does not tell the whole story. BofA, Needham, and Canaccord, all hold the street high level of $30, with the low mark of $24 still a shade over 20% up from the current mark. With higher than average call volume on Options reported in a bullish direction indicating that markets are expected further positives from PATH in next weeks earnings on May 29th, time will soon tell whether they are right or not.

For those who may feel a tinge of regret for missing out on Nvidia's ascension, UiPath offers a potential gateway to the burgeoning AI market. With a strong financial foundation, commitment to innovation, and robust partner network, UiPath stands as alternative prospect for those seeking to capitalize on the AI revolution, but one thing seems certain in this space, there will be more volatility to come.