As a leading player in the field of robotic process automation, UiPath (PATH) holds the potential for tremendous growth (and shareholder value creation) in a rapidly expanding market.
But the real question is, will the company be able to capitalize on this opportunity and deliver long-term rewards for those who remain loyal shareholders?
A Closer Look at UiPath
With a solid balance sheet and a massive addressable market, UiPath appears well-positioned for growth – albeit the company is still in its nascent stages.
When UiPath made its debut on the New York Stock Exchange in April 2021, it was valued at approximately $36 billion, with shares closing at $69 per share on its first day of trading. However, since then, shares have plummeted and growth has decelerated from 80.8% in 2021 to 46.8% in 2022, with closer to 16% growth expected this year.
The decline in growth and the cash burn rate have raised concerns among investors, leading to the billion dollar question: how long will this trend persist?
On the plus side, UiPath has $1.76 billion in cash and cash equivalents on its balance sheet, providing the company ample runway to invest in product and marketing to sustain growth in a recession.
How Far Could UiPath Go?
Recent changes implemented by co-CEO Rob Enslin, a former president of sales at Google Cloud, have set the stage for the company’s growth trajectory. These changes include:
- Revised pricing strategy,
- Enhanced customer segmentation,
- Staff layoffs.
They are all aimed at capturing a larger share of the rapidly growing robotic process automation market, forecast to grow annually at north of 23% through the end of the decade.
UiPath has already established solid partnerships with industry leaders such as Microsoft and Accenture. The company has also demonstrated its ability to grow its customer base, even during challenging economic times. By the end of 2022, it had 10,100 customers, which grew to around 10,650 by Q3 2023. This growth, coupled with recognition for world-class customer satisfaction, highlights the company’s potential value and resilience.
Another reason to be optimistic is the recurring revenue that PATH generates via its customer partnerships. The company’s annualized recurring revenue (ARR) has been on the rise, and contracts are getting longer, offering a positive outlook for long-term investors.
What’s Next for PATH?
UiPath has shown impressive top-line growth and has a massive market opportunity in the fast-growing field of robotic process automation. However, it also faces near-term headwinds, including cash burn and a recent slowdown in growth.
We examined the financials and ran a 5 year discounted cash flow forecast analysis, which pegged fair value at $21.14 per share. That would correspond to an upside potential gain of 34.2%.
It’s worth noting that the consensus rating among analysts is $17.17, still above the current share price but not quite as bullish as our forecast. Usually, we find ourselves leaning more bearish than the Street but, in this case, we think there’s more upside than analysts are giving the company credit for.