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UiPath Is a Buy After Its Steep Decline

UiPath (NYSE:PATH) completed its initial public offering (IPO) in April of this year. Initially, PATH stock changed hands for around $70 per share. After topping out at $90, UiPath has slid considerably and closed yesterday at $57.45. That seems like a pretty normal trajectory for many newly public growth companies lately.

A magnifying glass zooms in on the website homepage of UiPath (PATH).

Source: dennizn / Shutterstock.com

However, UiPath is different from some other recent tech IPOs. Its business has actually been around a long time; the company’s founders launched it in Romania back in 2005. At first, it struggled to sell its coding tools to businesses.

Around 2015, however, UiPath’s active customer base exceeded 100 as its API automation and no-code solutions gained steam. In 2017, the firm opened new headquarters in New York.

Soon after, it launched its main enterprise robotic process automation (RPA) solutions. Subsequently, UiPath’s customer base exceeded 1,000 and soon thereafter surpassed 5,000. One thing followed another, and it all culminated with the company’s recent IPO.

At this point, however, will the shares climb further? Or has UiPath’s growth already peaked? While there may be valuation-based concerns about the stock in the short-term, the truth is that UiPath looks to still be in the early innings of a multi-decade growth surge.

Automating Automation Itself

UiPath has an expansive long-term goal. It wants to provide the software and tools to help companies in a futuristic world that relies far less  on human labor. Fundamentally, UiPath aims to eliminate as many mundane, repetitive tasks with automation as possible. It uses robots or computer systems to accomplish that goal.

We may not see a sci-fi utopia in our lifetimes, but UiPath wants to push the world toward something resembling that future as much as possible. UiPath will help companies and end users reach that lofty goal through its RPA solutions, which allow programmers to code robots or automated tools to perform repetitive tasks.

With the supply chain crisis and labor shortage, UiPath’s products are more important than ever. In the current environment, companies need to get the most that they possibly can out of their existing workforce and resources; UiPath helps them do that.

Already a Large Platform

UiPath is the industry leader in RPA. According to a report from Forrester Wave, UiPath has the leading industry capabilities right now in RPA, According to Forrester, UiPath’s RPA solutions are ahead of those of Microsoft (NASDAQ:MSFT), SAP (NYSE:SAP), Pegasystems (NASDAQ:PEGA), and numerous other, privately owned competitors.

As a consequence,  UiPath  could become an acquisition target. RPA is clearly a field that larger tech companies are interested in. UiPath could serve as a strong building block that a large firm could use to establish a leading position in robotics and automation programming software.

RPA has already developed into a large sector. Analysts expect UiPath to generate $870 million in revenues in fiscal year 2022 and $1.2 billion in 2023. The company is also already breaking even on earnings per share. So make no mistake about it: UiPath has demonstrated that there is broad and quickly-growing demand for its suite of products.

The Verdict on PATH Stock

Normally, stocks that have recently undergone IPOs are quite risky. The reason is that  companies which aren’t seasoned tend to be more volatile because their operating results can quickly fluctuate.

In the case of UiPath, however, its management already has a long track record. Additionally, UiPath’s revenue base is quite substantial compared with many companies in the immediate aftermath of their IPOs. As a result, investors should have confidence in UiPath.

Indeed, UiPath has already proven that there is a huge addressable market for its product s. At $29 billion, the firm’s market capitalization is already substantial as well, but it is supported by almost $1 billion per year in annual revenues.

Will UiPath’s leadership in RPA ensure a smooth upward climb by its stock in the coming years? Not necessarily.

But the odds of its stock succeeding are reasonably good. Its product seems ideal for the current environment, and the shares’ valuation isn’t nearly as steep as it was when it hit $90. If you’re looking to pick up a hypergrowth stock today, UiPath’s shares are a good choice.

On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.


Article printed from InvestorPlace Media, https://investorplace.com/2021/11/uipath-is-a-buy-after-its-steep-decline/.

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