Analysts’ forecasts indicate an increase in share prices

of UiPath NYSE: PATH Accelerating growth has driven its stock market higher over the past twelve months, and the trend continues after its fourth-quarter results. Results were better than expected, with growth accelerating sequentially and year-over-year setting a record, compounded by wider margins and the first quarter of GAAP profits.

As the gains were driven by new business and penetration of existing customers, the momentum is expected to continue this year and analysts are making revisions. Guidance for the first quarter is weak but potentially cautious, and the outlook for the year is robust, leading them to increase their price targets. The company expects sequential growth throughout the year with new records in sight.

UiPath’s high-margin business beats consensus estimates

Growing demand for AI-powered business automation software led UiPath to post a solid quarter. The company produced net revenues of $405.25 million, a gain of 31.45% over the past year. This is up from the previous quarter’s 25% growth and contraction a year earlier. Revenue hit a new record and beat the Marketbeat.com consensus by 560 basis points.

UiPath’s critical segments grew by double digits, with licenses growing by 38% and subscriptions by 27%, offset by a 16% decline in professional services. The decline in Professional Services is a warning sign, but is mitigated by the size of the segment. Professional services represent 2% of the business and are not a significant driver.

The news on margins is good. The company expanded margin on a gross and operating basis and on a GAAP and adjusted basis to reverse prior-year GAAP losses and grow adjusted earnings faster than revenues. Adjusted gross margin rose about 200 basis points to 89%, with adjusted operating margin at 27.2%. Adjusted earnings of $0.22 increased 47% year-over-year and exceeded 3,750 basis points; free cash flow increased 36% to $146 million.

Will UiPath stock grow in 2024?

Internal metrics and guidance favor solid results this year. The company’s ARR grew 22%, with net retention of 119%, as its customer base grows and penetration deepens. As for the outlook, the company expects a seasonal slowdown in sequential growth, but for the year it will be strong.

The revenue forecast of $330 million to $335 million for the first quarter is well below the consensus figure of $347 million, but potentially conservative given the company’s momentum. For the year, the company expects $1.55 billion in net revenue on the low end, above consensus, with growth accelerating sequentially.

Factors suggesting outperformance include the launch of Autopilot, new developer features, a DOD contract, and expanded partnerships with Google and Deloitte. Autopilot offers productivity-enhancing tools that were highlighted at the company’s developer conference. The DOD contract validates the software’s effectiveness for government use, opening the door for follow-on efforts. Partnerships with Google and Deloitte will bring UiPath capabilities to more companies, facilitating an easier transition to automation.

Is UiPath well capitalized?

UiPath’s business is well capitalized and cash flow positive, so there are no red flags on the balance sheet for investors. Highlights from the fourth-quarter report include $1.9 billion in cash and equivalents, virtually no debt, and increased equity. Equity increased by 5% and is expected to improve again in 2024. The risk for shareholders is dilution. Share count increased 5% with stock-based compensation, but was partially offset by share repurchases.

Will UiPath Analyst Ratings Rise Due to 2024 Guidance?

Analysts are already raising ratings and price targets for this stock. Marketbeat is tracking nearly a dozen post-release updates, including two updates to Overweight and numerous price target revisions. The revisions are all upward and the consensus is moving higher. The consensus is for the market to move down around 5%, but most of the new targets are above that, in the $25 to $30 range. A move above $27.50 would be significant and would set a new long-term high, opening the door for a full reversal for this market. In that scenario, UiPath shares could rise 50% to 100% in subsequent quarters.

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