The AI stock is growing quickly and is relatively cheap.
Cathie Wood of Ark Investment Management is well known for investing in high-growth, cutting-edge technology companies that she thinks are industry disruptors. Not surprisingly, artificial intelligence (AI) is one of the investment themes she is most excited about. However, the top AI holding in her flagship Ark Innovation ETF(ARKK -0.32%) may surprise investors. It’s not Nvidia or Microsoft, but instead a lesser-known company called UiPath(PATH -0.66%). The stock is the fifth-largest position in the Ark Innovation ETF, representing about 5.8% of its holdings.
With Wood excited about the prospect of UiPath, the question is, does the stock deserve a place in your portfolio?
A leader in AI automation
UiPath is an AI-powered automation company that helps clients build tools to perform various business tasks. So what exactly does that mean? The company’s platform allows organizations to do several things. One is that it helps automate everyday mundane tasks. This could be something like data entry or filling out forms. It also provides low-code development tools to create apps, as well as tools to understand and process documents such as invoices.
In addition to providing tools to help clients automate tasks, UiPath’s platform also helps organizations identify areas where they can implement automation to help improve their businesses. The company’s platform will also track and share automation performance metrics as well as do quality assurance testing. The company also has tailored solutions for various industries and departments.
Overall, UiPath’s AI-powered automation platform is designed to help organizations become more efficient and save money. That’s important because these types of tech companies tend to be less economically sensitive and continue to solidly grow through various economic cycles.
Upselling and partnership opportunities
One area that UiPath has done well with is growing its revenue with large existing enterprise customers. The company has shown strong net dollar retention, which is a measure of the amount of revenue coming from existing customers after churn, upgrades, and downgrades. Its dollar-based net retention was 123% for its fiscal year 2023 ended in January and 119% in fiscal year 2024. This shows that once customers implement UiPath’s platform, they tend to expand it to other departments or add more licenses.
What UiPath hasn’t done much of recently is add a lot of new customers. It ended its fiscal 2024 with 10,830 customers, which was an increase of just 30 net customers compared to a year ago. What it has done, though, is increase its number of large enterprise customers. Customers spending $1 million a year or more with the company increased nearly 26% to 288 customers, while clients spending over $100,000 a year or more rose 15% to 2,054.
Adding new customers, however, will be an opportunity for UiPath. To help on this front, the company has recently entered into or expanded several distribution partnerships to help sell its solutions. It will look toward partnerships with SAP, Microsoft, Deloitte, and Ernst & Young to help it add new customers. Once UiPath is able to get into an organization, it has shown the ability to nicely grow, and these partnerships can help get it through more doors.
Image source: Getty Images.
Building momentum
UiPath has been growing its revenue quickly, but even more impressively, its revenue growth accelerated throughout its fiscal 2024. The company grew its revenue by 31% in the fourth quarter compared to 24% growth in the third quarter, 19% in the second quarter, and 18% revenue growth in the first quarter. That shows a lot of movement in UiPath’s business and how customers are embracing its solutions as AI technology becomes more important.
UiPath trades at about 8x forward sales projections, but just 6.7x on an enterprise-value-to-revenue basis. The latter metric takes into account the company’s strong net cash position, which stood at $1.9 billion at the end of its fiscal year. UiPath’s strong revenue growth, balance sheet, and cash-flow generation ($309 million in adjusted free cash flow) suggest the stock remains inexpensive, especially given the opportunity ahead of it. It is also trading at a much lower multiple compared to other software companies (like Adobe and Intuit) that have been embracing AI.
As such, UiPath looks like a great name for growth investors to add to their portfolios.
Geoffrey Seiler has positions in UiPath. The Motley Fool has positions in and recommends Adobe, Intuit, Microsoft, Nvidia, and UiPath. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
