On Thursday, JPMorgan revised its price target for UiPath Inc. (NYSE: NYSE:PATH) shares to $19.00 from the previous $28.00, while keeping an Overweight rating on the stock.
The adjustment follows UiPath's recent update to its financial outlook for FY25, which included a downward revision of total revenue, annual recurring revenue (ARR), profitability, and free cash flow expectations.
UiPath has lowered its FY25 total revenue forecast from the initial midpoint of $1.5575 billion to $1.4075 billion and its ARR from $1.7275 billion to $1.6625 billion.
The company also reduced its projected FY25 post-function operating income from $295 million to $145 million and free cash flow from approximately $350 million to about $300 million.
Despite these decreases, UiPath's implied total costs and expenses remain unchanged, indicating the company's decision not to prioritize margin preservation.
The guidance revision is attributed to both macroeconomic challenges and internal operational issues. UiPath has experienced increased scrutiny over deals and longer sales cycles, particularly with mid-market customers.
Internal challenges include inconsistent sales execution, suboptimal changes to sales compensation, and the need for a more effective strategy for scaling growth products like Intelligent Document Processing (IDP). UiPath is actively working to address these internal issues.
UiPath also discussed the impact of its GenAI strategy on customer behavior, noting that while AI is seen as a tailwind, it also introduces a level of confusion for customers determining which tasks are best suited for AI versus UiPath's platform. The company believes that a combination of GenAI and automation is the optimal solution.
Furthermore, UiPath announced that Autopilot for developers and testers is expected to become generally available in June, having received significant interest and positive feedback from customers across various industries. The product's acceptance rate during its Q4 earnings call was reported as being quite good.
In conclusion, JPMorgan acknowledges the challenges faced by UiPath, including macro pressures and AI-related uncertainties, but maintains a positive outlook for the stock's long-term potential in the automation market. The revised price target reflects current market conditions and internal adjustments within the company.
InvestingPro Insights
In light of JPMorgan's recent price target revision for UiPath Inc. (NYSE: PATH), real-time data from InvestingPro offers additional context for investors considering the enterprise automation software company's stock. With a market capitalization of $10.48 billion and a forward-looking P/E ratio that remains negative at -93.57, UiPath's valuation reflects the challenges it faces. However, the company's gross profit margin stands strong at 85.09%, underscoring its ability to maintain profitability in core operations despite broader financial revisions.
Two notable InvestingPro Tips for UiPath include the company's robust cash position, holding more cash than debt on its balance sheet, which provides financial flexibility in uncertain times. Additionally, analysts predict UiPath will become profitable this year, suggesting a potential turnaround from the previous twelve months of unprofitability. These insights, coupled with the company's impressive gross profit margins, may reassure investors about UiPath's financial health and operational efficiency.
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