Shares from the robotic process automation expert UiPath (AWAY 0.21%) rose 27.2% in November 2023, according to data from S&P Global Market Intelligence. The month also ended with a bang, with UiPath shares seeing another 26.7% rise on December 1st. Including that extra day of November earnings, UiPath stock rose 61.2% in 31 days.
The rocket fuel for UiPath’s 31-day journey in November
The actual gains in November weren’t particularly exciting, to be honest. UiPath’s stock generally rose through the final week of the month along with other artificial intelligence (AI) experts, buoyed by improving economic news and new discussion about the possibilities of AI.
Leading provider of machine learning hardware Nvidia reported stellar financial results on November 21, but UiPath’s stock barely moved the next day – and Nvidia’s share price fell on modest guidance and profit-taking investors. These counterintuitive market moves are to be expected when an entire industry is sailing on the wings of new technologies whose long-term impact on the market is yet to be seen. There is a healthy mix of speculative traders and long-term investors. The eternal tug of war between these investment philosophies creates and destroys shareholder value on the stock market. Without them, stockholders might as well watch the paint dry.
Therefore, UiPath started its earnings report with impressive momentum. The stock had gained 55.5% year to date when it released its update for the third quarter of fiscal 2024, which ended on October 31. Revenue rose 24% year-over-year to $326 billion, adjusted earnings doubled from $0.05 to $0.12 per share, and free cash flow fluctuated from a cash burn of $33 million to a cash-based profit of $41 million.
These numbers blow up UiPath’s third-quarter forecast and Wall Street consensus estimates. The resulting single-day jump was a natural response to this groundbreaking report.
What the rise of UiPath means for the future
UiPath management expects fourth-quarter revenue growth of approximately 24% as well as sequential improvements in recurring revenue and adjusted operating income. In other words, the positive business trends that catapulted UiPath to unexpected heights in the third quarter have continued into the current reporting period.
If you think of UiPath as a canary in the AI coal mine, the bird is perfectly healthy and chirping songs full of digital joy. By integrating generative AI into its robot system control, the company is taking full advantage of the current market situation. If people need AI-powered help in formulating their robot control processes, UiPath is happy to provide this interface.
The stock isn’t cheap today, trading at 11 times sales and 55 times free cash flow. On the other hand, these cash flows have just turned positive and the AI sector has even higher valuation metrics these days. All in all, UiPath doesn’t seem like a sure-fire success to me, but you should take a closer look and perhaps take a modest and slightly speculative position in the stock.