Company Reports

Narrow-moat UiPath reported solid second-quarter earnings that beat our top-line estimates but fell short in terms of profitability. Subscription revenue continues to be a top-line driver, with the firm’s software-as-a-service offering gaining traction among new and existing customers. However, higher stock-based compensation and restructuring expenses offset any GAAP operating margin gains from the growing software sales, yielding a net loss. The firm expects unstable macroeconomic conditions to persist and trimmed its full-year guidance, and we have adjusted our near-term estimates accordingly. Nevertheless, this is immaterial to our long-term outlook, and we maintain our $16.50 fair value estimate. Shares traded up 10% after hours toward our unchanged valuation, yet remain attractive.

UiPath offers end-to-end cross-application process automation software. It deploys a combination of automation technologies including robotic process automation, application programming interface, artificial intelligence, and low-code/no-code functionality to automate complex, multistep processes. UiPath’s core RPA technology boasts leading market share by revenue and has garnered accolades from industry analysts for superior product functionality and strategy.

We have launched coverage of UiPath with a $16.50 fair value estimate and narrow moat rating. UiPath offers end-to-end cross-application process automation software that delivers meaningful cost savings, efficiency, and risk-management benefits to customers looking to automate repetitive processes traditionally executed by humans. UiPath shares cratered following the most recent quarterly results as near-term guidance fell below consensus estimates on macroeconomic pressures and internal execution issues, as well as the sudden departure of CEO Rob Enslin after a short tenure. Nonetheless, we view these issues as transitory, and at current prices, the shares screen attractive on a risk-adjusted basis.

UiPath offers end-to-end cross-application process automation software. It deploys a combination of automation technologies including robotic process automation, application programming interface, artificial intelligence, and low-code/no-code functionality to automate complex, multistep processes. UiPath’s core RPA technology boasts leading market share by revenue and has garnered accolades from industry analysts for superior product functionality and strategy.