On Thursday, Scotiabank updated its outlook on UiPath Inc. (NYSE:PATH), increasing the price target to $30 from $29 while retaining a Sector Perform rating on the stock. The adjustment follows UiPath's announcement of its financial guidance and recent earnings performance, which surpassed expectations.
UiPath reported its first-ever GAAP profitable quarter, with operating margins reaching 27% compared to the 20% anticipated by Scotiabank. The company's FY25 Annual Recurring Revenue (ARR) guidance indicated an 18% growth, exceeding the consensus of 17%. Operating margin guidance for the same period is projected at 19%, surpassing Scotiabank's estimate of 17%.
The analyst noted that UiPath is gaining momentum through larger, strategic deals, with the C-suite increasingly investing in the company's automation platform narrative. Approximately 65 of the top 100 deals were platform-related. Collaborative go-to-market strategies with Global System Integrators (GSIs) and software vendors, especially SAP, are proving to be successful.
Management mentioned that around 1,000 customers are currently testing UiPath's Autopilot capabilities, which are part of their Generative AI SKU. The analyst sees potential for upside to the FY25 guidance, particularly regarding margins. Attention is now turning to UiPath's upcoming AI Summit on March 19th, where further details on the integration of automation and Generative AI are expected.
The new price target of $30 is based on an estimated 36x Enterprise Value to CY25E Free Cash Flow. Despite the positive outlook and revised target, Scotiabank is awaiting a more favorable entry point before altering its rating on UiPath shares.
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