UiPath Provides 'Big Opportunity, But Big Multiple To Match,' Says Analyst Initiating Coverage

UiPath Inc PATH shares are up more than 20% since the company priced its April IPO at $56.

UiPath automates repetitive workplace processes. The company reported $607.6 million in revenue in the last fiscal year, up 81% year-over-year. At the same time, UiPath’s net loss narrowed from $519.9 million in 2019 to just $92.4 million in 2020. The company’s 89% gross margin is reportedly among the highest in the software industry.

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UiPath shares jumped 23% on their first day of trading on April 21, closing the day at around $69 and giving the company a $35.8 billion market value.

Since then, the stock has drifted mostly sideways, but several of UiPath’s IPO underwriters finally weighed in on the stock on Monday following the mandatory quiet period.

Massive Growth Potential: Needham analyst Scott Berg said robotic process automation (RBA) is still in the early innings, and companies are constantly finding new uses for the technology.

“We view PATH as a strong melding of what every growth investor seeks: an industry-leading platform in what might be the fastest-growing sub-sector of software with a massive TAM,” Berg wrote.

Wells Fargo analyst Michael Turrin said UiPath has a rare combination of a massive scope of vision, an impressive financial profile and a unique technology platform.

“The challenge for investors is at $40Bn in market cap and 35x FY23e EV/S, one truly has to believe this can, and will, become the next major category-defining platform in software,” Turrin wrote.

Full Valuation: Morgan Stanley analyst Keith Weiss said UiPath stock is a “big opportunity, but big multiple to match.”

“With a combination of strong technology, aggressive investment in distribution and a fast-growing (and expansive) market opportunity, we forecast UIPath sustaining 30%+ ARR growth through FY25 and a 29% 10-year CAGR building ARR to a base of $10 billion in FY31,” Weiss wrote.

RBC Capital Markets analyst Matthew Hedberg said he is bullish on UiPath’s opportunity to grow its market share in the $60 billion RPA market.

“However, with the stock at 35.2x CY/22E EV/S, we think much of our enthusiasm is priced into shares,” Hedberg wrote.

Ratings And Price Targets:

• Morgan Stanley has an Equal Weight rating and a $70 target.
• Needham has a Buy rating and an $85 target.
• Wells Fargo has an Equal Weight rating and a $75 target.
• RBC has a Sector Perform rating and a $74 target.

(Photo: UiPath)