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UiPath’s AI bots can trigger its tipping point in 2024

UiPath stock price

UiPath Inc. (NYSE: PATH) is the world’s largest provider of end-to-end robotic process automation (RPA) and business process automation (BPA) platforms. This business services sector company has integrated and infused generative artificial intelligence (AI) into its products, resulting in an even more seamless and intuitive experience for end users. It is generating real results from AI services offering enterprises AI-powered solutions like Inc. (NYSE: AI).

In a nutshell, UiPath's software, comprised of AI software bots, is designed to discover, mine, configure, optimize, and automate processes specific to many industries, including healthcare, manufacturing, financial services, and the public sector. Its annualized renewal run rate (ARR) has had a compound annual growth rate (CAGR) of 35% since fiscal Q1 2022 through fiscal Q3 2024.

UiPath Autopilot

As the name appropriately implies, the UiPath Autopilot is a set of AI tools enabling users to get more out of its business automation platform. These tools are tailored to the talent to help with automating specific tasks. For developers, the Autopilot for UiPath Studios and UiPath Apps helps them create apps and workflows faster. Autopilot for UiPath Test Suite enables testers to generate test cases that ensure reliable automation and apps.

For analysts, Autopilot for UiPath Process Mining and Communications Mining helps them discover potential automation opportunities in as-is processes easily. Autopilot for Everyone helps anyone looking for help automating and completing time-consumer everyday tasks. The company has a land and expanded strategy that continues to have clients add on new services as the dollar-based net retention rate grew to 121%.

Profitable and Growing

UiPath released its fiscal third-quarter 2024 EPS of 12 cents, beating consensus analyst estimates by 5 cents. GAAP operating loss was $56 million, while non-GAAP operating income was $44 million. Revenues surged 24% YoY to $325.92 million, beating $315.64 million consensus estimates. ARR rose 24% YoY to $1.378 billion. Its non-GAAP operating income is expected to be around $78 million. Net new ARR was $70 million. GAAP gross margin was 85%. Non-GAAP gross margin was 87%.UiPath closed the quarter with $1.8 billion as of Oct.31, 2023.

In-line guidance

UiPath issued in-line guidance for fiscal Q4 2024 for revenues of $381 million to $386 million versus $382.84 million consensus analyst estimates. ARR is expected in the range of $1.450 billion to $1.455 billion. Non-GAAP operating income is expected around $78 million.

CFO comments

UiPath CFO Ashim Gupta commented, “Our relentless focus on operational excellence once again resulted in strong top-line growth and year-over-year improvements in profitability and cash flow," Gupta continued, "Given the strength of our business model, we expect to balance growth and profitability while investing in the business to position UiPath for long-term success."

Analyst reactions

BMO Capital Markets has a Market Perform rating on PATH shares with a $24 price target, citing higher free cash flow estimates and higher conviction in growth potential driven by process, task, and communication mining diversified portfolio tools. Non-RPA solutions can improve the win rates and attrition rates for core RPA solutions. Morgan Stanley raised its price target to $17 from $16, raising its fiscal full-year 2024 ARR guidance. RBC Capital Markets raised its price target to $24 from $19 and maintained its Market Perform rating. Analyst firm William Blair initiated coverage with an Outperform rating on Jan. 2, 2024.

UiPath analyst ratings and price targets are at MarketBeat. UiPath peers and competitor stocks can be found with the MarketBeat stock screener.

 Daily rising wedge breakdown pattern

The daily candlestick chart on PATH illustrates a rising wedge breakdown pattern. PATH gapped up through the daily market structure low (MSL) trigger at $22.28 following its fiscal Q3 2024 earnings release. Shares peaked at $26.53 as the rising wedge formed consisting of higher highs and higher lows with a tightening price channel that eventually triggered the breakdown when the lower ascending trendline broke down through $25.41 on Dec. 28, 2023.

PATH fell to a low of $21.49 on Jan. 14, 2024, and triggered the daily MSL breakout to stage a rally back to $24.40 as shares attempted to hold above the daily 50-period moving average (MA) support at $23.15. The daily relative strength index (RSI) is bouncing off the 50-band. Pullback support levels are at $22.28, $20.31, $19.34 and $17.82.

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