On Thursday, BofA Securities adjusted its stance on UiPath Inc. (NYSE: NYSE:PATH), moving from a Buy to a Neutral rating. The firm significantly reduced the price target for the company's shares to $16 from the previous $30. The new target is based on a 5.1 times multiple of the estimated revenues for the calendar year 2025 (C25E), a decrease from the earlier 8.8 times revenue multiple.
The downgrade was prompted by a notable slowdown in the company's growth. This deceleration is attributed to a combination of factors, including increased macroeconomic pressures, challenges with execution, and a sudden change in management. These issues have led to a reassessment of the company's short-term prospects.
Despite the current low valuation of UiPath's shares, which closed at $13 after hours, BofA Securities' new price target still suggests a potential 23% upside based on the stock's performance. However, the firm indicates that a re-acceleration of growth is a key driver needed for the stock to realize this potential.
The analyst from BofA Securities emphasized that while the shares are trading at a relatively low valuation, reflecting 4.1 times C25E revenue, the timeline for growth to pick up again remains uncertain. Until signs of growth re-acceleration emerge, the firm maintains its Neutral position on UiPath Inc.
Investors are now observing how the company will address the challenges it faces, including the recent management changes, and whether it can effectively navigate the macroeconomic pressures that have impacted its growth trajectory.
InvestingPro Insights
UiPath Inc. (NYSE: PATH) has recently undergone a significant reevaluation by BofA Securities, and investors looking for additional insights may find the latest data from InvestingPro useful. According to InvestingPro, UiPath holds a strong cash position relative to its debt, which could provide financial flexibility in challenging economic times. Moreover, the company's gross profit margins are impressive, standing at 85.09% over the last twelve months as of Q4 2024. This indicates a strong ability to control costs relative to revenue, an important factor considering the firm's current growth concerns.
While UiPath is not currently profitable, analysts predict a turn to profitability this year, which could be a pivotal point for the company if these forecasts hold true. Additionally, InvestingPro data shows that UiPath's market capitalization stands at $10.48 billion, with a high revenue growth of 23.57% over the last twelve months as of Q4 2024. Despite recent price volatility, with a 1-year price total return of 10.44%, there might be a potential for upside if the company successfully addresses its execution challenges and macroeconomic pressures.
For those seeking more comprehensive analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/PATH. These tips could offer deeper insights into the company's financial health and future outlook. Investors can access these tips and more with an exclusive offer: use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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