Shares in UiPath (NYSE:PATH) fell 20% overnight as the company cut its revenue forecast and saw downgrades from analysts. UiPath is an automation software company, originally founded in Romania. It has tripled its revenue since 2020, but PATH stock is now going through growing pains.
The overnight fall took about $1.6 billion off the market cap, with shares opening just above $12.50 each.
Off the Growth Path
The strong dollar and a likely European recession seem to be weighing most on UiPath. The company came public in April 2021 at $56 per share and was worth more than $30 billion at its peak.
UiPath now expects third-quarter revenue of about $244 million with an annualized renewal run rate, or ARR, of $1.09 billion. It expects a further slowdown in the fourth quarter. The company has yet to turn a profit and posted a loss of $122 million, or 23 cents per share, in its most-recent quarter.
Despite the stock’s fall, and the slowdown over currencies and global growth, the underlying business appears sound. UiPath recently bought Re:Infer, which mines text communications for insights, and it has a data integration partnership with Snowflake (NYSE:SNOW).
Only 5.6% of the stock was recently held short. Cathie Woods’ ARK Innovation (NYSEARCA:ARKK) fund was steadily accumulating PATH stock until June. Morgan Stanley is among the firms that have downgraded the stock. It now rates the stock as “equal weight” with a price target of $15 per share.
What Happens Next for PATH Stock?
No one is paying 10 times revenue for money-losing growth stocks anymore, no matter their niche. UiPath stock will likely remain down until the currency and European growth winds shift. At its Sept. 7 opening price, it’s selling at a little more than 6.5 times revenue.
But companies whose software can lower costs, like UiPath, do have a good future. At some point, bargain hunting can be expected.
On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
