Is UiPath a good investment?

By Patricia Miller

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Since UiPath debuted on the NASDAQ in April 2021, it has brought Robotic Process Automation (RPA) to the masses.

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Robotic Process Automation (RPA) sounds serious. It conjures up images of manufacturing plants, clunky machinery, and assembly lines. But RPA is much more discreet. In fact, it can be invisible, and UiPath (NYSE: PATH) is a hot new arrival. Since it debuted on the NASDAQ in April 2021, it has brought RPA to the masses.

As the world’s leading RPA software company, UiPath began life in 2005 with a team of 10 people based in Bucharest led by Daniel Dines. Fast forward to 2021 and they are the leader on every major independent user review site for RPA and are the only RPA provider named to Forbes AI 50, when they were added in 2020.

With a growing team of more than 3,000 people, UiPath offers an end-to-end platform for automation, combining their leading RPA solution with a full suite of capabilities and techs such as AI, process mining and the Cloud to enable organisations to rapidly scale their business operations.

With this in mind and the increasing growth in digital transformation and automation, investors are asking themselves if they should invest in UiPath stock and whether UiPath is a good investment?

Fundamentals of UiPath stock

UiPath is being used across industries for a wide variety of reasons. And it seems the Covid-19 pandemic has helped to fast track its implementation and appeal. Launching its IPO in April 2021, UiPath received a warm welcome and was priced at $56 a share and opened at $66 raising over $1.3 billion.

This was a great result, finally closing the day with a market value exceeding $36 billion. This turned out to be the third largest US software IPO in history, following Snowflake (NYSE: SNOW) in first place and Qualtrics (NASDAQ: XM) in second.

ARK Invest bought 2.7 million shares in UiPath at IPO, and it appears it sold shares in Tesla (NASDAQ:TSLA) to do so. Considering Tesla is ARK’s biggest bull play, that’s quite the accolade for UiPath. ARK Invest has since added further $PATH shares to its ARKF, ARKG and ARKQ funds. Meanwhile, London-based venture capital firm Draper Esprit partially disposed of its UiPath holding.

Currently the UiPath stock price is $64.83 with a market cap of $32.82B. The company’s revenue saw a 64% increase from $113.10M in April 2020 to $186.22M in April 2021. The company said its “fully automated enterprise” software gives it a current market opportunity of more than $60 billion.

UiPath uses its own technology internally to advance its learning and this is also illustrated through its impressive customer base. UiPath boasts some of the world’s biggest and best companies on its books. Facebook (NASDAQ: FB), Uber (NYSE: UBER), Google parent Alphabet (NASDAQ:GOOGL), NASA, Autodesk (NASDAQ: ADSK), HP (NYSE:HPQ), DHL (ETR: DPW) and many more.

What is the bull case for UiPath?

UiPath is eliminating paperwork by automating repetitive tasks. This includes filling out forms, moving files around, inputting data and scraping text from documents. But it’s not simply used on legacy systems, it’s automating a natural transition into a new way of working.

Historically, these mundane repetitive tasks were simply too small to be worth spending money on employing computer programmers to automate them. But with UiPath, the processes are effortless.

The company has developed its own technology, based on AI, machine learning and its own deep learning models behind the scenes. The result is a computer vision technology that follows user actions to interpret the task and create a solution. All this is done without having any knowledge of coding.

The company has found that customer retention is not just easy, it’s inevitable as its clients come to expand the scope and size of the use cases the UiPath technology can be used for across their organisations.

UiPath calls this its ‘land-and-expand’ business model and it’s based on its ability to deliver significant value in a short space of time. This has led to a dollar-based net retention rate of 145% as of January 2021.

In the past few years, the company has made some strategic acquisitions to extend its product offering and capabilities, from automating simple activities to becoming ever more sophisticated as time goes by. And it’s no longer pure RPA as it expertly emulates people through cognitive recognition.

A question regularly asked, when it comes to automation, is, will this replace jobs, leading to mass unemployment. The answer given by Daniel Dines is:

“Technology can change jobs for the better. For instance, farming was a massively labour intensive and tough job 100 years ago, but it’s much more fun now. And that’s thanks to advances in automation”.

What is the bear case for UiPath?

While tech stocks had their moment in the sun last year, the appeal seems to be waning. That may not be such a bad thing, if it gives the newcomers a chance to prove themselves worthy of astronomical valuations. In its S1 prospectus Daniel Dines says:

“When humans and robots interact, the human is unburdened from repetitive, dull, monotonous tasks to think, to collaborate, to solve the hard problems we face today. It’s as though they are given wings to soar above the mundane to achieve greater things. We enable the fully automated enterprise so this can happen”.

While adoption of AI, automation and RPA is on the increase, and in many instances became a necessity during the pandemic, there is still a fair amount of caution when it comes to these new technologies.

This will likely be short-term and in say five years organisations will be wondering how they managed without it, but right now organisations aren’t necessarily ready to jump in with both feet.

Should I invest in UiPath stock?

Sentiment for UiPath stock is positive, as a company it has a strong brand and product that could carry it in the long run. As digital transformation and automation are still currently hot topics and organisations look at the ways they can improve efficiencies and productivity, UiPath appears to offer a solid solution.

It is anticipated that the stock has the ability to double if not triple in value over the next five years, which would make it a great investment. But it is important to remember this is just a forecast and not set in stone.

As the shift to new ways of working, RPA and automation continue to grow so will companies offering these solutions, so how long UiPath will stay at the top of their field remains to be seen, but they are currently in a strong position and could well hold on to it for years to come.

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In this article:

Topics:
Systems Software
Industries:
Information Technology
Companies:
UiPath

Author: Patricia Miller

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

Patricia Miller does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the above article.

Patricia Miller has not been paid to produce this piece by the company or companies mentioned above.

Digitonic Ltd, the owner of ValueTheMarkets.com, does not hold a position or positions in the stock(s) and/or financial instrument(s) mentioned in the above article.

Digitonic Ltd, the owner of ValueTheMarkets.com, has not been paid for the production of this piece by the company or companies mentioned above.