Stock story –
What happened?
Shares of automation software company UiPath (NYSE:) rose 7.9% in the morning session as market optimism around innovators in the software as a service (SaaS) space continued to improve following strong Salesforce earnings. The enterprise software giant showed clear progress in responding to demand for AI solutions, signing 200 deals within a week of launching Agentforce, its new AI platform for enterprise customers. Additionally, Salesforce reported that there are thousands more deals in the pipeline, indicating robust future growth.
Reviewing some of the numbers, Salesforce reported revenue and adjusted operating income that exceeded Wall Street expectations. On the other hand, earnings per share and some revenue growth indicators, including billings and remaining performance obligations (RPO), fell slightly below consensus estimates as products like Tableau, MuleSoft and Slack showed some weaknesses. Despite the mixed revenue performance, CRM recorded double-digit growth in the Sales and Service Cloud segments, which is encouraging.
Since the start of the AI boom, Wall Street has been craving hard numbers to justify the lofty expectations surrounding the sector’s potential. The numbers are finally trickling in and the data suggests that the trajectory of the AI market could exceed initial expectations, heralding the shift from speculative hype to tangible value creation.
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What the market tells us
UiPath stock is quite volatile, having seen 18 moves of more than 5% in the past year. In that context, today’s move indicates that the market sees this news as meaningful, but not as something that would fundamentally change its perception of the company.
The biggest move we wrote about in the past year came six months ago, when shares fell 35.1% on news that the company reported first-quarter results and cut full-year revenue expectations, significantly lagging Wall Street expectations. The company noted that it saw “more deal research and longer sales cycles for large multi-year deals.”
Moreover, a slowdown in growth was observed in the second half of March and April due to a challenging macroeconomic environment and a change in consumer behavior, which were likely the cause of the weak expectations. Finally, the company said investments to re-accelerate growth fell short of expectations, making the company less agile in responding to customer needs and causing short-term pressure on operating margins.
In addition, CEO Rob Enslin unexpectedly resigned.
Following the disappointing results, several Wall Street analysts downgraded the stock. For example, Bank of America (NYSE:) downgraded the stock to Neutral from Buy and lowered its price target from $30 to $16, underscoring weakening near-term conviction given execution and growth challenges.
Overall, this was a weak quarter for the company, providing little reason for investors to remain positive.
UiPath is down 35.7% year-to-date and at $15.31 per share is trading 43.1% below its 52-week high of $26.88 set in February 2024. Investors who bought into the IPO If you bought $1,000 worth of UiPath stock in April 2021, you would now be looking at an investment worth $221.81.
