UiPath, the automation-software company, has impressed analysts with its latest earnings report, demonstrating its ability to thrive despite a tough macroeconomic environment. However, while the company’s performance has been commendable, it has yet to fully convince Wall Street of its potential for accelerated growth.
Following its October-quarter earnings release, UiPath shares experienced a significant surge, with premarket trading seeing a 14% increase to reach $22.45. If this growth trend continues, the stock could rise to its highest level since early 2022.
UiPath’s focus on major clients has yielded positive results, as evidenced by the fact that customers generating $1 million or more in annual recurring revenue have grown by 31%, reaching a total of 264 individuals.
Analyst Gil Luria from D.A. Davidson noted in a research note that UiPath’s strategic decision to prioritize the value of large clients with extensive automation journeys has paid off. These customers are playing a key role in driving the company’s overall growth.
Luria has raised his target price for UiPath stock to $20 from $17 but maintains a Neutral rating. He emphasizes the need for further evidence of the company’s return on its 20% increase in sales and marketing investment.
One ongoing debate surrounding UiPath stock is whether it will benefit from the increasing investment in artificial intelligence technology. The company firmly believes that generative AI is an opportunity rather than a threat. To support this stance, UiPath recently unveiled its own set of AI tools called Autopilot, which will be seamlessly integrated into its automation platform.
J.P. Morgan analyst Mark Murphy anticipates that UiPath could strategically position itself to leverage future opportunities, despite prevailing macroeconomic uncertainties. However, he highlights that a crucial aspect will be how customers allocate their budgets for 2024 and whether UiPath can capture a larger share of the AI-related funds.
Murphy has raised his target price for the stock to $22 from $19 but maintains a Neutral rating. He acknowledges that while annual recurring revenue growth currently stands at 24%, it is decelerating compared to previous quarters.
In conclusion, UiPath has demonstrated its ability to deliver strong earnings amid challenging economic conditions. The company’s focus on major clients and confidence in the power of AI technology position it well for future growth. However, it is essential for UiPath to provide further evidence of the returns on its investment, particularly in sales and marketing, in order to fully convince investors.