What happened
Shares of UiPath (PATH 0.77%) took a dive last month as the growth stock was hit by the sell-off in the first half of March and then plunged at the end of the month when it reported earnings. Though the company's fourth-quarter results topped estimates, guidance for 2022 was disappointing, and the stock finished March down 38%, according to data from S&P Global Market Intelligence.
So what
Like other growth stocks, UiPath fell in the first half of March on concerns about rising interest rates, inflation, and a slowing economy as investors expect those factors to slow down economic growth and possibly cause a recession, but the earnings report was the biggest reason for the sharp decline.
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UiPath, a software company that specializes in robotic-process automation, also known as bots, said that revenue increased 39% to $289.7 million, ahead of estimates at $283.6 million. Annual recurring revenue jumped 59% to $925.3 million, showing the strength of its subscription business.
On the bottom line, the company's adjusted earnings per share slipped from $0.09 to $0.05, which still beat $0.03.
CEO Daniel Dines said:
Our customers understand that automation is at the forefront of digital transformation and fundamental to driving efficiency, employee satisfaction, and strengthening customer relationships, all necessary to successfully navigate today's complex operating environment and establish a sustainable competitive advantage.
What really killed the stock was UiPath's outlook as the company said it was taking a cautious approach to 2022 due in part to the war in Ukraine, which could cool off the European market.
For the first quarter, UiPath expects revenue of $223 million to $225 million, representing 33% growth, which was well below estimates at $243.1 million. For the full year, the company called for revenue of $1.075 billion to $1.085 billion, or just 21% growth, which was worse than expectations at $1.16 billion and shows top-line growth sharply decelerating from the 47% growth it achieved in 2021.
Now what
UiPath's guidance could turn out to be conservative, and investors should pay attention to the war in Ukraine and the impact on the European economy as a dragged-out conflict could put pressure on the company.
Over the long term, however, the stock looks promising as a leader in robotics-process automation and low code, but a potential recession and investor doubts about its valuation mean it could be challenged this year unless it can beat its guidance.
