On Monday, KeyBanc Capital Markets began coverage on shares of UiPath Inc. (NYSE:PATH) stock, assigning an Overweight rating and setting a price target of $27.00.
The firm highlighted UiPath's commanding presence in the robotic process automation (RPA) and automation sectors as a key factor underpinning its optimistic outlook. They noted that UiPath is poised to continue capturing market share within its sizable total addressable market (TAM), which exceeds $60 billion.
According to the coverage, UiPath's recent improvements in execution and an increase in expansion and platform adoption are promising signs. These developments, along with go-to-market and leadership changes over the past two years, are starting to yield positive results. The firm anticipates these factors could lead to a potential annual recurring revenue (ARR) growth of over 20% in fiscal years 2025 and 2026.
KeyBanc established the $27 price target based on a 9x multiple of the company's expected fiscal year 2025 enterprise value to sales ratio (EV/sales), which adjusts to 7.5x for fiscal year 2026. The firm's analysis suggests that the potential for UiPath to achieve growth in ARR could allow for a multiple expansion of 2 to 3 turns, aligning the company closer to the SaaS group average of 9 to 10 times.
The firm's coverage suggests that the strategic alterations made by UiPath in recent times are starting to pay off, potentially leading to significant growth in the company's ARR. This growth is seen as an opportunity for UiPath to increase its market valuation multiples, drawing nearer to the averages seen in the broader SaaS industry.
InvestingPro Insights
UiPath Inc. (NYSE:PATH) has caught the attention of investors and analysts alike, as reflected in KeyBanc Capital Markets' recent Overweight rating and $27.00 price target. Adding to the conversation, InvestingPro provides further insights that may interest investors looking to dive deeper into UiPath's financial health and market performance. With a market capitalization of $12.07 billion, UiPath exhibits an impressive gross profit margin of 85.09% for the last twelve months as of Q4 2024, underscoring its strong ability to control costs relative to its revenue.
While the company is currently trading at a high revenue valuation multiple, with a price-to-book ratio of 5.99, analysts remain optimistic about UiPath's future profitability. One of the InvestingPro Tips highlights that UiPath holds more cash than debt on its balance sheet, which is a positive sign for the company's financial stability. Additionally, despite not being profitable over the last twelve months, there's an expectation of net income growth this year, which could be a catalyst for future share price appreciation.
With these metrics in mind, investors may find additional value in exploring the comprehensive set of InvestingPro Tips available. For those interested in a deeper analysis, there are 5 more tips listed on InvestingPro for UiPath, which can be accessed at https://www.investing.com/pro/PATH. To enhance your investing strategy, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking a wealth of data and insights to inform your investment decisions.
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