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UiPath: Not Your Path To Profits

I believe paying 41x forward non-GAAP operating profits for UiPath Inc. is unjustifiable.In this tough macro environment, the premium on the stock is bound to shrink, not grow.Compared to other IT sto

UiPath: Not Your Path To Profits

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{"i18n":{"language":"en_US"},"data":{"magic":2,"id":335648695456016,"tweetId":"335648695456016","gmtCreate":1722981645744,"gmtModify":1722981649565,"author":{"id":3579826693676471,"idStr":"3579826693676471","authorId":3579826693676471,"authorIdStr":"3579826693676471","name":"brian008","avatar":"https://community-static.tradeup.com/news/7aaaca7b8cab4d63851e899b8cda3e77","vip":1,"userType":1,"introduction":"","boolIsFan":false,"boolIsHead":false,"crmLevel":1,"crmLevelSwitch":0,"individualDisplayBadges":[],"fanSize":0,"starInvestorFlag":false},"themes":[],"images":[],"coverImages":[],"html":"<html><head></head><body><p>dont buy market recession coming. dont buy anymore stock.</p></body></html>","htmlText":"<html><head></head><body><p>dont buy market recession coming. dont buy anymore stock.</p></body></html>","text":"dont buy market recession coming. dont buy anymore stock.","highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"link":"https://ttm.financial/post/335648695456016","repostId":2457038607,"repostType":2,"repost":{"id":"2457038607","kind":"highlight","pubTimestamp":1722884649,"share":"https://www.laohu8.com/m/news/2457038607?lang=&edition=full","pubTime":"2024-08-06 03:04","market":"sg","language":"en","title":"UiPath: Not Your Path To Profits","url":"https://stock-news.laohu8.com/highlight/detail?id=2457038607","media":"seekingalpha","summary":"I believe paying 41x forward non-GAAP operating profits for UiPath Inc. is unjustifiable.In this tough macro environment, the premium on the stock is bound to shrink, not grow.Compared to other IT sto","content":"<html><body><ul><li>I believe paying 41x forward non-GAAP operating profits for <a href=\"https://laohu8.com/S/PATH\">UiPath</a> Inc. is unjustifiable.</li><li>In this tough macro environment, the premium on the stock is bound to shrink, not grow.</li><li>Compared to other IT stocks, UiPath's valuation is excessively high given its growth rates.</li></ul><p><figure><picture><img fetchpriority=\"high\" height=\"3558px\" sizes=\"(max-width: 768px) calc(100vw - 36px), (max-width: 1024px) calc(100vw - 132px), (max-width: 1200px) calc(66.6vw - 72px), 600px\" src=\"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1220591821/image_1220591821.jpg?io=getty-c-w750\" srcset=\"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1220591821/image_1220591821.jpg?io=getty-c-w1536 1536w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1220591821/image_1220591821.jpg?io=getty-c-w1280 1280w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1220591821/image_1220591821.jpg?io=getty-c-w1080 1080w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1220591821/image_1220591821.jpg?io=getty-c-w750 750w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1220591821/image_1220591821.jpg?io=getty-c-w640 640w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1220591821/image_1220591821.jpg?io=getty-c-w480 480w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1220591821/image_1220591821.jpg?io=getty-c-w320 320w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1220591821/image_1220591821.jpg?io=getty-c-w240 240w\" width=\"6614px\"/></picture><figcaption><p>Ivan Bajic</p></figcaption></figure></p> <h2>Investment Thesis</h2> <p><b>UiPath Inc.</b> (<span>NYSE:PATH</span>) is priced at 41x this year's non-GAAP operating profits. A figure that leaves investors with no upside potential.</p> <p>More concretely, investors getting involved with UiPath right now, will have to navigate a challenging macro environment, while<span> its stock's valuation is doomed to see its premium compress.</span></p> <p>All in all, this stock is a sell. Here's why.</p> <h2>Rapid Recap</h2> <p>In my previous analysis, I described why I reversed my bullish stance on PATH,</p> <blockquote> <p><em>I know from experience that there's no point in compounding one poor investment decision, through sunken cost biases, with another poor investment decision.</em></p> <p><em>In fact, I believe that the only way to outperform the market is by being upfront and recognizing one's mistakes. Everyone makes investment bad decisions. But the amateur blames someone else, while the professional blames themselves and works to rectify and recoup<span> their poor decision.</span></em></p> <p><em>As it stands right now, including the premarket sell-off of 30%, PATH is being priced at 50x forward operating profits. A completely unjustified premium for what it offers investors.</em></p> </blockquote> <p><figure contenteditable=\"false\"><picture><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/8/5/17546952-1722832936397532.png\"/></picture><figcaption><p>Author's work on PATH</p></figcaption></figure></p> <p>As you can see above, I was previously bullish on PATH. But when I saw its fiscal Q1 2025 results, I recognized that being bullish on PATH was a mistake.</p> <p>Consequently, rather than compounding my mistake, I believed that turning bearish was the right course of action. And now, given the recent developments in the market, I reiterate my sell call.</p> <h2>Recent Developments</h2> <p>UiPath creates software to help businesses automate repetitive tasks. This is a software business aimed at making enterprises more nimble and productive.</p> <p>Think of it like a digital assistant that can handle routine work, such as data entry. UiPath's software, often called a \"robot\" or \"bot,\" can do these mundane tasks quickly and accurately. This helps customers save time, reduce errors, and allow employees to focus on more important work.</p> <p>Furthermore, investors had bought into the idea that there would be a secular growth trend for software companies. But as it turns out, <em>software adoption is just as cyclical as other sectors</em>, it's just that investors had been willing to pay very high premiums on the assumption that growth \"was guaranteed.\"</p> <p>Most software companies have yet to report their quarterly earnings. But the few that have, have echoed comments similar to those of Mathew Prince the CEO of <a href=\"https://laohu8.com/S/NET\">Cloudflare, Inc.</a> (NET):</p> <blockquote><p>[...] our crystal ball still shows that it's challenging sledding for the overall IT environment over the quarters ahead.</p></blockquote> <p>And you can see this reflection in investors' expectations across the board for IT software stocks</p> <p><figure><img height=\"366\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/8/5/saupload_b1f79d89154114f93036381e4aab566a.png\" width=\"635\"/><figcaption>Data by YCharts</figcaption></figure></p> <p>What you see, above, is that software stocks are decidedly out of favor with investors. And the reasons are that their growth rates are starting to peter out and moderate faster than investors had previously expected, a topic we delve into now.</p> <h2>Revenue Growth Rates Won't Get Upwards Revised</h2> <p><figure contenteditable=\"false\"><span><img contenteditable=\"false\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2024/5/30/17546952-1717050237663748.png\"/></span><figcaption><p>PATH revenue growth rates</p></figcaption></figure></p> <p>The thesis for investors had been PATH was being conservative with its guidance, and that when fiscal Q2 2025 was reported at some point in September, it would upwards revise its full-year outlook.</p> <p>But now, when UiPath reports its fiscal Q2 2025, I believe its guidance will probably point towards around 10% to 11% topline growth, and not much more.</p> <p>And what will be particularly challenging for UiPath is that its comparables in the back half of the year are so high. And this reinforces my contention.</p> <p>The best that UiPath has to offer for fiscal 2025, is now in the rearview mirror. Given this consideration, plus the doubts over its ability to reignite its revenue growth rates back to high teen growth rates, all of a sudden, this stock is unworthy of carrying such a high premium valuation.</p> <h2>PATH Stock Valuation - 41x Forward Non-GAAP Operating Profits</h2> <p>In the first instance, let's discuss the bullish aspect facing investors. More than 15% of UiPath's market cap is made up of cash and marketable securities and no debt. That is undeniably bullish and should support its valuation, up to a certain extent.</p> <p>On the other hand, for this fiscal year, UiPath may deliver around $160 million of non-GAAP operating profits. This leaves the stock priced at 41x forward non-GAAP operating profits. A figure that is too generous for a company navigating such a tough environment, together with such questionable growth rates.</p> <p>For the sake of comparison, consider that more established IT stocks, for example, <a href=\"https://laohu8.com/S/NOW\">ServiceNow</a>, Inc. (NOW) are priced at about 35x forward operating profits, while growing at mid-20s% growth rates.</p> <p>Altogether, UiPath's valuation is too stretched for what it offers investors.</p> <h2>The Bottom Line</h2> <p>Paying 41x forward non-GAAP operating profits for UiPath Inc. (PATH) simply doesn't make sense.</p> <p>Given the challenging macro environment and the reality of its growth prospects, investors are likely to see this premium compress rather than expand. This stock's valuation is unsustainable, especially when compared to more established IT stocks with better growth rates.</p> <div></div> <p>Therefore, it's clear that investing in PATH at this price point is unwise. Investors should look elsewhere for opportunities, as this automation isn't on the path to profits.</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>UiPath: Not Your Path To Profits</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; 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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nUiPath: Not Your Path To Profits\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-08-06 03:04 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4710573-uipath-not-your-path-to-profits><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>I believe paying 41x forward non-GAAP operating profits for UiPath Inc. is unjustifiable.In this tough macro environment, the premium on the stock is bound to shrink, not grow.Compared to other IT ...</p>\n\n<a href=\"https://seekingalpha.com/article/4710573-uipath-not-your-path-to-profits\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1220591821/image_1220591821.jpg","relate_stocks":{"BK4581":"高盛持仓","LU1923623000.USD":"Natixis Thematics AI & Robotics Fund R/A USD","LU2125909593.SGD":"Natixis Thematics Meta R/A SGD","BK4548":"巴美列捷福持仓","LU2125909247.SGD":"Natixis Thematics Meta H-R/A SGD","LU1974910355.USD":"Allianz Thematica Cl AMg DIS USD","LU1951200564.SGD":"Natixis Thematics AI & Robotics Fund R/A SGD","LU0943347566.SGD":"安联收益及增长平衡基金AM H2-SGD","LU1861559042.SGD":"日兴方舟颠覆性创新基金B SGD","LU0109391861.USD":"富兰克林美国机遇基金A Acc","LU2286300806.USD":"Allianz Cyber Security AT Acc USD","LU1551013425.SGD":"Allianz Income and Growth Cl AMg2 DIS H2-SGD","LU1988902786.USD":"FULLERTON LUX FUNDS GLOBAL ABSOLUTE ALPHA \"I\" (USD) ACC","BK4539":"次新股","LU2106854487.HKD":"ALLIANZ THEMATICA \"AMG\" (HKD) INC","NOW":"ServiceNow","LU0889565833.HKD":"FRANKLIN TECHNOLOGY \"A\" (HKD) ACC","LU1551013342.USD":"Allianz Income and Growth Cl AMg2 DIS USD","LU2125909759.SGD":"Natixis Thematics Safety H-R/A SGD","BK4554":"元宇宙及AR概念","LU2125909916.SGD":"Natixis Thematics Safety R/A SGD","LU1989764664.SGD":"CPR Invest - Global Disruptive Opportunities A2 Acc SGD-H","IE00BMPRXR70.SGD":"Neuberger Berman 5G Connectivity A Acc SGD-H","LU1923622291.USD":"Natixis Thematics Safety R/A USD","BK4534":"瑞士信贷持仓","LU2023250843.SGD":"Allianz Thematica Cl AT Acc H2-SGD","LU1989764748.USD":"东方汇理环球颠覆性机遇A2 Acc","LU2433249047.HKD":"THEMATICS META \"R/A\" (HKD) ACC","LU1323610961.USD":"UBS (LUX) EQUITY SICAV - LONG TERM THEMES (USD) \"P\" (USD) ACC","BK4505":"高瓴资本持仓","BK4566":"资本集团","LU2264538146.SGD":"Fullerton Lux Funds - Global Absolute Alpha A Acc SGD","LU0011850046.USD":"贝莱德全球长线股票 A2 USD","BK4116":"互联网服务与基础架构","LU0320765059.SGD":"FTIF - Franklin US Opportunities A Acc SGD","BK4588":"碎股","BK4550":"红杉资本持仓","LU0672654240.SGD":"FTIF - Franklin US Opportunities A Acc SGD-H1","BK4503":"景林资产持仓","LU0316494557.USD":"FRANKLIN GLOBAL FUNDAMENTAL STRATEGIES \"A\" ACC","PATH":"UiPath","LU1951198990.SGD":"Natixis Thematics AI & Robotics Fund H-R/A SGD-H","BK4551":"寇图资本持仓","LU1861558580.USD":"日兴方舟颠覆性创新基金B","LU0354030511.USD":"ALLSPRING  U.S. LARGE CAP GROWTH \"I\" (USD) ACC","LU0708995401.HKD":"FRANKLIN U.S. OPPORTUNITIES \"A\" (HKD) ACC","BK4097":"系统软件","BK4547":"WSB热门概念","LU0354030438.USD":"富国美国大盘成长基金Cl A Acc"},"source_url":"https://seekingalpha.com/article/4710573-uipath-not-your-path-to-profits","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2457038607","content_text":"I believe paying 41x forward non-GAAP operating profits for UiPath Inc. is unjustifiable.In this tough macro environment, the premium on the stock is bound to shrink, not grow.Compared to other IT stocks, UiPath's valuation is excessively high given its growth rates.Ivan Bajic Investment Thesis UiPath Inc. (NYSE:PATH) is priced at 41x this year's non-GAAP operating profits. A figure that leaves investors with no upside potential. More concretely, investors getting involved with UiPath right now, will have to navigate a challenging macro environment, while its stock's valuation is doomed to see its premium compress. All in all, this stock is a sell. Here's why. Rapid Recap In my previous analysis, I described why I reversed my bullish stance on PATH,  I know from experience that there's no point in compounding one poor investment decision, through sunken cost biases, with another poor investment decision. In fact, I believe that the only way to outperform the market is by being upfront and recognizing one's mistakes. Everyone makes investment bad decisions. But the amateur blames someone else, while the professional blames themselves and works to rectify and recoup their poor decision. As it stands right now, including the premarket sell-off of 30%, PATH is being priced at 50x forward operating profits. A completely unjustified premium for what it offers investors.  Author's work on PATH As you can see above, I was previously bullish on PATH. But when I saw its fiscal Q1 2025 results, I recognized that being bullish on PATH was a mistake. Consequently, rather than compounding my mistake, I believed that turning bearish was the right course of action. And now, given the recent developments in the market, I reiterate my sell call. Recent Developments UiPath creates software to help businesses automate repetitive tasks. This is a software business aimed at making enterprises more nimble and productive. Think of it like a digital assistant that can handle routine work, such as data entry. UiPath's software, often called a \"robot\" or \"bot,\" can do these mundane tasks quickly and accurately. This helps customers save time, reduce errors, and allow employees to focus on more important work. Furthermore, investors had bought into the idea that there would be a secular growth trend for software companies. But as it turns out, software adoption is just as cyclical as other sectors, it's just that investors had been willing to pay very high premiums on the assumption that growth \"was guaranteed.\" Most software companies have yet to report their quarterly earnings. But the few that have, have echoed comments similar to those of Mathew Prince the CEO of Cloudflare, Inc. (NET): [...] our crystal ball still shows that it's challenging sledding for the overall IT environment over the quarters ahead. And you can see this reflection in investors' expectations across the board for IT software stocks Data by YCharts What you see, above, is that software stocks are decidedly out of favor with investors. And the reasons are that their growth rates are starting to peter out and moderate faster than investors had previously expected, a topic we delve into now. Revenue Growth Rates Won't Get Upwards Revised PATH revenue growth rates The thesis for investors had been PATH was being conservative with its guidance, and that when fiscal Q2 2025 was reported at some point in September, it would upwards revise its full-year outlook. But now, when UiPath reports its fiscal Q2 2025, I believe its guidance will probably point towards around 10% to 11% topline growth, and not much more. And what will be particularly challenging for UiPath is that its comparables in the back half of the year are so high. And this reinforces my contention. The best that UiPath has to offer for fiscal 2025, is now in the rearview mirror. Given this consideration, plus the doubts over its ability to reignite its revenue growth rates back to high teen growth rates, all of a sudden, this stock is unworthy of carrying such a high premium valuation. PATH Stock Valuation - 41x Forward Non-GAAP Operating Profits In the first instance, let's discuss the bullish aspect facing investors. More than 15% of UiPath's market cap is made up of cash and marketable securities and no debt. That is undeniably bullish and should support its valuation, up to a certain extent. On the other hand, for this fiscal year, UiPath may deliver around $160 million of non-GAAP operating profits. This leaves the stock priced at 41x forward non-GAAP operating profits. A figure that is too generous for a company navigating such a tough environment, together with such questionable growth rates. For the sake of comparison, consider that more established IT stocks, for example, ServiceNow, Inc. (NOW) are priced at about 35x forward operating profits, while growing at mid-20s% growth rates. Altogether, UiPath's valuation is too stretched for what it offers investors. The Bottom Line Paying 41x forward non-GAAP operating profits for UiPath Inc. (PATH) simply doesn't make sense. Given the challenging macro environment and the reality of its growth prospects, investors are likely to see this premium compress rather than expand. This stock's valuation is unsustainable, especially when compared to more established IT stocks with better growth rates.  Therefore, it's clear that investing in PATH at this price point is unwise. Investors should look elsewhere for opportunities, as this automation isn't on the path to profits.","news_type":1},"isVote":1,"tweetType":1,"viewCount":245,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"EN","currentLanguage":"EN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":49,"xxTargetLangEnum":"ORIG"},"commentList":[],"hasMoreComment":false,"orderType":2}