Key points
- Cathie Wood is one of the notable investors who didn’t benefit from the meteoric rise in NVDA stock.
- Wood has a stake in UiPath, the world’s largest provider of end-to-end robotic process automation (RPA) and business process automation (BPA) platforms.
- UiPath represents the next stage in the AI journey, which Wood seems to be banking on.
- 5 titles we like most about UiPath
In case you missed the 244% gain. Nvidia Corporation NASDAQ:NVDA you’ve had some impressive company over the past 12 months. Cathie Wood, head of Ark Investment Management, sold NVDA shares in 2023 and never looked back.
Wood’s critics, and there are many, will see this as further ammunition for their criticism of his investing style. Detractors most commonly point to his Ark funds’ heavy concentration in highly volatile disruptive technology stocks, the high valuations of many top picks and, in some cases, disappointing short-term performance.
But could this be a tortoise and hare situation where Wood will, in time, get the last laugh? Wood hasn’t abandoned artificial intelligence stocks. He is simply taking a different path. Whether he succeeds or not will depend on a title that his funds have purchased in spades, that of UiPath Inc. NYSE: PATH.
A path to future wealth?
Wood began purchasing PATH shares in April 2022, which coincided with the company’s IPO. He has continued to maintain or increase his position to this day. Today, UiPath is the second largest holding by number of shares in its signature Innovation Ark ETF NYSEARCA: ARKK.
At the time of his first purchase, Wood expressed “strong belief in UiPath’s ability to integrate Robotic Process Automation (RPA) into many business processes in large enterprises around the world.” To this end, UiPath has customers across multiple industries, including healthcare, banking and financial services, insurance, government, telecommunications, and manufacturing.
The company’s mantra is “UiPath is AI at work.” Its AI software robots can help enterprise customers move from discovery to fully automated operations. Since the first quarter of fiscal 2022, UiPath has increased its annualized renewal rate (ARR) at a compound annual growth rate (CAGR) of 35% through the most recent quarter ending September 2023.
It’s the chicken egg
Nvidia’s growth reminds investors that the AI story is still in its early stages. That’s why investors continue to focus on Nvidia. AI chips will be essential to enable AI applications. But no chip can make an application with software. Perhaps this is the bet Wood is making on UiPath.
The question is: should you?
PATH stock has fallen more than 66% since its initial public offering (IPO). However, the stock is up 52% over the past 12 months, but UiPath analyst ratings at MarketBeat have a Hold rating on the stock with a consensus price target of $22.32 which is 6% below the price of March 4, 2024.
Looking at the options chain for PATH stock, $23.50 appears to be a sweet spot for short-term call and put options. Going out through mid-April, traders expect the stock to be range-bound around the current level.
One catalyst could be the company’s next earnings report on March 13, 2024. The company expects revenue of $381 million. This is slightly lower than the consensus estimate of $382.84 million. Additionally, the company expects annual recurring revenue (ARR) to be between $1.45 billion and $1.455 billion.
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