Does UiPath’s Pivot To Agentic AI Make The Stock A Buy?
UiPath (NYSE:PATH), a global software company specializing in robotic process automation (RPA), saw its stock jump nearly 8% in after-hours trading on Friday and remains up around 10% over the past five trading days. This comes after a string of partnerships with AI heavyweights including Nvidia and OpenAI, which could signal a renewed growth narrative for the company. UiPath stock has slightly underperformed so far this year, as investors grappled with uncertainty over the rise of AI and how it would be integrated with the company’s platform and also due to continued weak profitability. So do the recent deals make the stock a buy?
From RPA to Agentic Automation
Traditionally, UiPath has focused on automating repetitive digital tasks, such as updating customer relationship management (CRM) systems or managing enterprise resource planning (ERP) workflows. With the Gen AI era, the company is looking to transition to agentic automation, where AI agents autonomously execute complex, knowledge-based processes with minimal human intervention. Automation with RPA (robotic process automation) is largely rule-based, repetitive tasks—like copying data from one system to another, updating spreadsheets, or processing invoices. On the other hand, agentic automation uses AI-driven “agents” to handle complex, end-to-end processes that require decision-making, context understanding, or problem-solving.
Strategic AI Partnerships
The latest deals the company has signed are aligned with this goal. A key part of UiPath’s pitch is vendor flexibility: its platform can integrate with multiple AI providers, reducing customer concerns about being locked into a single ecosystem. UiPath’s collaborations span some of the biggest names in AI and enterprise software. OpenAI will add a ChatGPT connector, enabling customers to embed advanced language models directly into workflows, while GPU behemoth Nvidia (NASDAQ:NVDA) will bring its multimodal Nemotron models and NIM microservices for sensitive sectors such as healthcare and fraud detection, where data must remain on secure systems.
Google’s Gemini models are integrated to allow voice-command automation, giving users the ability to interact with complex workflows through natural language, while Snowflake will enable connectivity from its Cortex AI to UiPath’s platform, allowing companies to extract real-time insights and trigger automation tasks, effectively turning analytics into actionable, end-to-end business processes. Microsoft (NASDAQ:MSFT) will strengthen UiPath’s integration within its widely used enterprise software ecosystems.
Financials and Valuation
UiPath’s financials paint a mixed picture. The stock trades at about 4.7x trailing revenues, which is slightly ahead of the S&P 500, while it trades at about 23x free cash flow, roughly in line with the broader market. This is a fair multiple considering that revenue growth has been fairly robust. Sales rose at a 14.6% annually on average over the last three years, while growing 14.4% YoY in the most recent quarter, well above S&P 500 averages. Profitability, however, remains weak, with a -3.1% operating margin and 1.3% net margin over the past twelve months, despite generating $335M in operating cash flow.
On the positive side, financial stability is strong: the company carries only $79 million in debt, with a Debt-to-Equity ratio of 1.1% and holds $1.4 billion in cash, which is more than half of its total assets. That said, the major risk factor is downturn resilience: PATH lost 87.6% of its value during the 2021-22 inflation shock stock market drawdown and remains far below its $85 peak, indicating its significant volatility.
The company’s reasonable valuation, combined with strong recent growth, makes the stock relatively attractive at current levels. Moreover, the company’s shift towards agentic AI with the new partnerships could further shift the narrative for the stock, although execution and improving profitability will be key.
That being said, if you seek an upside with less volatility than holding an individual stock like PATH, consider the High Quality Portfolio. It has comfortably outperformed its benchmark—a combination of the S&P 500, Russell, and S&P MidCap indexes—and has achieved returns exceeding 91% since its inception. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
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