UiPath is the IBD Stock of the Day as the maker of back-office automation software forges an early entry point for aggressive investors. Bulls and bears on UiPath stock clash over the impact of generative artificial intelligence and Microsoft's new products on the company's growth prospects.
Meanwhile, UiPath is a top holding of Cathie Wood's ARK Innovation ETF. And, UiPath stock is the No. 2 holding across all ARK Invest ETFs. Wood has stated that UiPath is a top play on artificial intelligence.
On the stock market today, UiPath stock rose 6.4% to close at 24.19.
UiPath competes in the robotic process automation, or RPA, market. RPA software companies provide tools that program robotic software to automate human tasks. Their bots are best suited for manual, high volume, repetitive tasks in back-office operations — typically automating accounting, billing and customer service.
Further, the UiPath's initial public offering in April 2021 raised $1.3 billion.
Aggressive Entry Point
In addition, PATH stock has consolidated after climbing in November on UiPath's third quarter earnings report. On a weekly chart, UiPath holds a traditional entry point of 26.52.
Shares are trying to bounce off their 50-day moving average. If they follow through, a more aggressive entry point would be its high on Jan. 24, which was 24.08.
The software company has posted three quarters of accelerating revenue growth. In the October quarter, sales rose 24% to nearly $326 million.
Meanwhile, earnings growth has also reaccelerated from a slowdown during the coronavirus emergence and shift to remote work.
UiPath's software scans documents, enters data into spreadsheets, opens PDF files and performs other tasks.
A key question for UiPath stock investors is whether generative AI tools will increase demand for UiPath software or not. Gen AI "copilots" are add-ons to software process "prompts," such as an internet search query, that describe what a user wants to get.
Companies are racing to develop customized AI for specific industries using their own proprietary data to train AI models.
At BMO Capital Markets, analyst Keith Bachman holds a neutral rating on the shares.
UiPath Stock: Microsoft Looms
"Longer term, we continue to believe gen AI brings both opportunities and threats to PATH," he said in a recent note to clients.
"On one hand, gen AI may pressure the RPA market as the competitive landscape may change especially as new rivals such as Microsoft have entered the RPA space," Bachman went on to say. "On the other, we think gen AI can help the adoption of RPA tools as it appeals to broader audience and use cases. PATH provides some of the most secure and reliable RPA solutions."
Microsoft is the biggest investor in startup OpenAI, the leader in building gen AI training models. The tech giant has upgraded its business productivity software with it gen AI-enabled "Microsoft Copilot."
Meanwhile, companies can buy UiPath's RPA software at Microsoft's cloud computing business called Azure.
In his note to clients, Truist Securities analyst Terry Tillman said: "UiPath has articulated the view that Microsoft's automation play is more around personal productivity whereas UiPath is focused on enterprise productivity. The bottom line is we believe Microsoft is a key infrastructure partner to UiPath. The two companies likely will maintain common interests and stay in separate swim lanes in terms of selling automation/productivity use cases."
UiPath Stock: Technical Ratings
UiPath stock holds a best-possible IBD Composite Rating of 99, according to IBD Stock Checkup.
IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. Also, the best growth stocks have a Composite Rating of 90 or better.
Further, UiPath stock has an Accumulation/Distribution Rating of A. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. Its current rating indicates more funds are buying than selling.
The rating, on a scale of A+ to E, measures institutional buying and selling in a stock. A+ signifies heavy institutional buying; E means heavy selling. Think of the C grade as neutral.
In addition, William Blair analyst Jake Roberge in January initiated coverage of UiPath stock with an outperform rating. He says the company has expanded from its RPA roots into other markets.
"Over the past few years, UiPath has expanded its product suite beyond traditional RPA use-cases and into a broader workflow automation and process optimization platform," Roberge said in a note. "Since 2020, UiPath has released solutions around document processing, process/task mining, and low-code application development, among others. These products have been well received."
Follow Reinhardt Krause on X, formerly called Twitter, @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
