UiPath adjusts first quarter expectations and raises revenue projections

UiPath Inc NYSE: PATH is a leader in robotic process automation (RPA) and business process automation (BPA) solutions. Their platform allows companies to use artificial intelligence (AI)-based software robots (bots) to automate repetitive, rule-based tasks that are normally performed by humans. This simplifies processes and workloads and improves efficiency while allowing humans to focus on more complex tasks.

Capitalize on 2 secular tailwinds

UiPath leverages two age-old positives, automation and artificial intelligence. This company from the business services sector

It is a clear benefactor in the artificial intelligence trend C3.ai Inc. NYSE:AI. The company released a strong fourth-quarter 2023 earnings report, easily beating top and bottom line estimates, only to see shares sell off with mixed guidance. The reaction is similar to that of previous quarters, where shares were sold off in the face of immediate downward guidance combined with raised annual guidance.

Excellent earnings in the fourth quarter of 2023

UiPath posted its fiscal fourth-quarter 2024 EPS of 22 cents, beating consensus analyst estimates by 6 cents. Revenue increased 31.3% year over year to $405.25 million. Annual recurring revenue (ARR) increased 22% year over year to $1.464 billion. The company earned its first quarterly GAAP profit since going public. Cash flow from operations and non-GAAP adjusted free cash flow was $146 million.

Mixed driving

While fourth-quarter 2024 results clearly beat top-line and profit estimates, stocks fell on their mixed guidance. PATH shares rose as high as $27.50 and as high as $22.50 in the after-hours session following the earnings release.

Its estimates for the first quarter of 2024 raised concerns as revenues are expected between $330 million and $335 million, missing consensus estimates of $346.84 million. ARR is expected to range between $1.508 billion and $1.513 billion.

Its full-year fiscal 2025 forecast provided bullish guidance with expected revenue between $1.555 billion and $1.560 billion, beating consensus analyst estimates of $1.53 billion. ARR is expected to be between $1.725 billion and $1.730 billion.

CEO Insights

UiPath CEO Rob Enslin highlighted the strong close to the fiscal year, which exceeded internal top- and bottom-line guidance. Quarterly revenue hit a record $406 million, up 31% year over year. Cost management and disciplined use of capital enabled the company to record its first GAAP profitable quarter since becoming a public company. Enslin reported that a joint study between UiPath and Bain revealed that 70% of executives said AI-based automation is critical to achieving their company’s strategic objective. This falls directly into UiPath’s wheelhouse.

Enslin commented: “Our business automation platform is the foundation for delivering value to every organization. Let’s make AI actionable, unlocking the promise of this next evolution of technology. And I believe the combination of artificial intelligence and automation is the enabler of strategic change for our customers.”

Land and expand

Its partnership with SAP generates pipelines in different geographies. One of its new clients is Switzerland’s largest retail and wholesale company. Customers switched to the solution after frustration with the old RPA provider, which lacked application performance monitoring solutions. They are launching document understanding to automate invoice processing with the goal of expanding enterprise-wide.

I travel with RPA

Enslin noted how one of its top 25 customers began its RPA journey in 2018 and has since adopted its comprehensive platform, which includes document understanding, test suites and process mining. As automation spreads across its many lines of business, the client has more than 15,000 robots automating thousands of processes. The client became a seven-figure customer with a deal in the fourth quarter of 2024, allowing them to implement communications mining in the human resources department, commercial bank and corporate investment bank.

Analyst updates

Needham reiterated a buy rating on PATH, raising his price target to $30 from $25. Analyst Scott Berg noted that fourth-quarter 2024 results were strong, driven by accelerating deal flow and strong platform sales. He commented that UiPath’s partnerships with SAP SE New York Stock Exchange: SAP, Alphabet Inc. NASDAQ:GOOGL, Microsoft Co. NASDAQ:MSFT and Deloitte continue to drive improvements in deal flow. JP Morgan raised its rating from Neutral to Overweight, raising its price target to $28 from $22. Mizuho reiterated its Neutral rating while raising its price target to $25, up from $22.

UiPath analyst ratings and price targets I’m on MarketBeat. UiPath peers and competitor actions can be found with MarketBeat Stock Screener.

Daily pattern of the descending triangle

The daily candlestick chart on PATH illustrates a descending triangle pattern. The upper descending trendline formed at the swing high of $27.87 on March 12, 2024. It limited bounce attempts on the descending trendline but held swing lows on the flat-bottomed lower trendline at $22.16. The daily relative strength index (RSI) is losing momentum, falling below the 50 band.

Historically, when PATH lowered its short-term guidance and raised its full-year guidance, stocks initially sold off only to recover later. Pullback support levels are at $22.16, $20.31, $18.18, and $17.27.

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