UiPath (NYSE: PAD) Stock prices continue to move in the wrong direction. The sudden resignation of CEO Rob Enslin sent the stock plummeting to an all-time low. So far, UiPath’s lead in robotic process automation (RPA) and its niche within artificial intelligence (AI) have failed to capture investor interest.
However, the robotics stock may have hit rock bottom, and if the company can regain its footing, it could be in a strong position to bounce back. Let’s see what’s in store for the troubled company.
What happened to UiPath?
The 2022 bear market seemed never-ending for UiPath stock. Amid slowing growth and competitive concerns, the stock missed last year’s bull market in AI stocks.
Furthermore, a sudden departure of the CEO is never a good sign for the company, but in this case it can be particularly worrying. Enslin had served as co-CEO of UiPath since April 2022, only taking full control when co-founder Daniel Dines left the position in late January.
Amid the departures, Dines has returned as CEO. Nevertheless, he will face continued struggles on the financial front. In the first quarter of fiscal 2025 (ended April 30), revenues of $335 million grew 15% annually, a slowdown from previous years.
Unfortunately, operating costs of $329 million remain high and fall short of revenue by just $6 million. As a result, the net loss for the first fiscal year was $29 million, only a slight improvement from the $32 million loss in the prior year quarter.
Why the news isn’t all bad
Despite the company’s challenges, Ark Invest’s Cathie Wood, a longtime UiPath bull, added more than 2 million shares to its various funds following the news. Other risk-tolerant investors may also have a unique buying opportunity here.
First, it was $89 million in stock-based compensation, a non-cash expense, that led to UiPath’s net loss. In contrast, non-GAAP adjusted free cash flow is booming, at $101 million for the first fiscal year. That’s an annual increase of 39% and indicates that the company’s finances may be in better shape than the income statement would suggest.
Furthermore, thanks to the falling share price, UiPath’s price-to-sales ratio (P/S) is 5. That’s a record low for the stock and an opportunity to buy an AI stock at a low price.
Investors should also remember that UiPath remains a leader in robotic process automation. Unlike the hardware robots that most investors might imagine, RPA refers to software robots that mimic human actions within software and digital systems.
UiPath stands out in this regard because it has built a developer community of 2.5 million members. As the company nurtures this community of developers through its ecosystem, it provides a strong incentive not to switch to competing RPA products.
According to GartnerThis approach gave UiPath a 36% market share in its industry, up from 34% in 2022. DataHorizzon Research also predicts that the RPA market will grow at a compound annual rate of 37% through 2032. So despite a relatively small market of $6.8 billion capitalization, UiPath remains a force in this sector, which should be hugely positive for the stock in the long term.
Will UiPath Stock Make a Comeback?
Ultimately, a comeback for UiPath isn’t guaranteed, but it’s a stock that more risk-tolerant investors should consider. The CEO’s departure is indeed a worrying sign, and the company’s stock has missed the AI ​​boom of the past year.
However, UiPath is a leading company in the fast-growing RPA industry. Considering its low price-to-earnings ratio, large developer community, and potential for faster growth, investors may later wish they had bought this stock at its current price.
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Will Healy has no position in any of the stocks mentioned. The Motley Fool holds and recommends positions in UiPath. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.
Will UiPath Stock Get Back on the Comeback Path? was originally published by The Motley Fool
