Shares of UiPath (NYSE: PATH) are down over 20% in pre-market trading today after the company announced its fiscal second quarter (ended in July) of 2023 results. It reported revenue of $242.2 million and an adjusted loss of $0.02 per share in the quarter. Comparatively, analysts forecast revenue of $230.8 million and adjusted earnings of $0.11 per share in Q2.
So, why is PATH stock price falling off a cliff despite beating consensus estimates? Investors were disappointed after UiPath issued disappointing revenue guidance for Q3. In the quarter ending in October, the company forecast revenue between $243 million and $245 million, compared to estimates of $269.6 million.
For fiscal 2023, UiPath’s sales forecast stood between $1 billion and $1.01 billion, below estimates of $1.09 billion. Let’s see if the tech stock can stage a comeback in the last quarter of the current year.
Is UiPath stock a buy right now?
UiPath provides an end-to-end automation platform. It offers a wide range of RPA (robotic process automation) solutions in the U.S., Japan, and Romania. Its suite of integrated software allows enterprises to build, manage, run, engage, measure, and govern automation across enterprises.
In Q2, UiPath surpassed annual recurring revenue of $1 billion and is forecast to reach ARR of $1.15 billion by end of fiscal 2023. During the earnings call, UiPath’s Co-Founder and CEO Robert Enslin stated, “The market is evolving and UiPath is leading the way with our end-to-end platform that covers the full automation lifecycle. To capitalize on the significant opportunity in front of us we are strategically repositioning the Company to elevate customer conversations, sell business outcomes, and help organizations realize the transformational benefits of automation.
We firmly believe these changes will position us for both growth and profitability.”
UiPath was named a leader for the fourth consecutive year by Gartner in its Magic Quadrant for RPA. It was positioned highest for its ability to execute and completeness of vision.
Due to its robust portfolio of solutions, UiPath has managed to increase sales from $336 million in fiscal 2020 to 892 million in fiscal 2022.
In Q2, it completed the acquisition Re:infer, a London-based natural language processing company for unstructured documents and communications. Re:infer uses machine learning technology to mine context from communication messages and transform them into actionable data.
UiPath also announced technology integrations with Snowflake (NYSE: SNOW), a cloud-based data platform.
Is PATH stock undervalued or overvalued?
UiPath stock price has fallen by 77% from all-time highs. But the company is part of a rapidly expanding addressable market, allowing it to surpass $1 billion in ARR within seven years. A report from Grand View Research forecasts the global RPA market to grow by 38% annually through 2030 to almost $31 billion.
Given that UiPath has a 27% share of the RPA market, it is well positioned to unlock multiple opportunities in the upcoming decade. If UiPath maintains its market share, the company’s sales will grow to $8.4 billion. Further, if its market share improves to 30%, UiPath’s revenue might touch $9.3 billion.
Analysts expect UiPath to increase revenue by 22% to $1.1 billion in fiscal 2023 and by 28% to $1.4 billion in fiscal 2024. So, PATH stock is valued at 6x forward sales, given its market cap of $8.4 billion, which is quite reasonable.
Considering consensus price target estimates, UiPath stock is trading at a discount of 100% right now.