UiPath (NYSE: PATH) shareholders haven't had a great 2024. While the rest of the market rose, the software company's shares have fallen by about 50%. Yet despite the spate of bad news that has hit the company, it seems like it still has a strong underlying business.
Often, all a stock needs is a glimmer of hope to kick-start a rally. UiPath investors recently got one, but will it be enough to trigger such a rebound?
UiPath's software has many applications
UiPath provides robotic process automation (RPA) software to its clients. Companies today are looking to generative AI technologies to help them improve their productivity, and RPA dovetails nicely with that by allowing users to automate repetitive tasks. This frees up people to do work that requires original thinking.
The biggest hurdle that UiPath can face is integration with the various software packages a company uses, but one type is usually found among all businesses: Microsoft Office. UiPath is a preferred Microsoft partner and its software integrates with all of the Office products and the generative AI Copilot.
UiPath checks a lot of boxes for investors in terms of its business model -- the problem has been its execution.
One bad quarter can hurt a stock for a long time
UiPath was a strong business heading into its fiscal 2025's first quarter, which ended Jan. 31. It was growing revenue at a 31% pace, and in the final quarter of fiscal 2024, it posted its first quarter of GAAP profitability. But that all fell apart in fiscal Q1: Revenue growth slowed, management cut revenue guidance for fiscal 2025, GAAP losses resumed, and its CEO departed.
Traders responded by selling the stock, but fiscal Q2 was a bit of a turnaround story. UiPath's founder and former CEO, Daniel Dines, returned to his old role as CEO and has steered the company in the right direction. In Q2, which ended July 31, UiPath's revenue topped the high end of the guidance range it had given in Q1, and management raised its full-year outlook, although not back to the levels given in fiscal 2024's fourth-quarter report.
UiPath still posted a significant operating loss of 33%, which was far worse than the 15% loss it sustained during Q1. However, investors shouldn't read too much into that because UiPath's business hasn't been completely steady throughout the year; its Q2s have historically had lower revenue than its Q1s, which cuts into its operating margin.
So, with established leadership back at the helm and revenue forecast trending up, is the stock worth buying here? I'd say yes. The RPA market opportunity was valued at just shy of $3 billion in 2023. However, Grand View Research forecasts that it will grow to nearly $31 billion by 2030. Additionally, after the sell-off it has gone through, UiPath's stock is dirt cheap.
PATH PS Ratio data by YCharts.
Trading at just shy of 5 times sales and positioned for a turnaround, UiPath looks like a bargain worth buying now. However, I wouldn't load up on the stock until the company starts booming again.
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Keithen Drury has positions in UiPath. The Motley Fool has positions in and recommends UiPath. The Motley Fool has a disclosure policy.
