Nov. 15 was an action-packed day, to say the least. A tragic missile strike in Poland and a softer-than-anticipated Producer Price Index (PPI) print were certainly signal events, but investors shouldn't dismiss the Form 8-K release that prompted a 12% jump in UiPath (PATH 3.49%) stock.
Will automation-bot software specialist UiPath's path to the upside continue into 2023? Beyond the recent cooling of inflation, company-specific details in the SEC filing suggest that UiPath stock could reclaim its growth-stock status in 2023.
The pains and benefits of "restructuring"
Like so many other technology businesses this year, UiPath has been compelled to cope with inflation by reducing its headcount. This won't likely be a morale booster, but a human capital trim-down may be a necessary evil as UiPath wends its way through a challenging economy.
It might not be entirely accurate, though, to say that UiPath has joined the Layoff Club as the company already had a workforce-reduction strategy in place. Back in June, UiPath reportedly planned to slash its employee count by around 5%; the company's latest round of "further restructuring actions" involve an additional 6% workforce reduction.
With that, UiPath's total restructuring expenses are estimated to ramp up from around $15 million to $30 million -- no pain, no gain, as they say. Hopefully, the layoffs will at least benefit UiPath in terms of "strategic positioning designed to increase execution velocity, operational efficiency, and customer centricity," in the company's own words.
Turning a profit -- by one measure, at least
UiPath's SEC filing wasn't notable only for its "restructuring" announcement, as the company also included its preliminary, unaudited third-quarter 2022 results. Starting with the top line, UiPath anticipates roughly $260 million in revenue, beating the analyst consensus estimate of $246.3 million.
Another sign that UiPath could move in the right direction in 2023 is that the company estimated $15 million in non-GAAP operating income for Q3 2022. In response, RBC Capital Markets analyst Matthew Hedberg was "particularly happy to see the company generate a non-GAAP profit."
Granted, that's only one way to measure a bottom-line result. After applying generally accepted accounting principles (GAAP), UiPath anticipates a quarterly operating loss of roughly $70 million. Still, Hedberg and prospective 2023 investors can enjoy UiPath's victories wherever they can find them.
"Winning big" will take time
For UiPath, winning big in 2023 could mean maintaining positive non-GAAP operating income and working toward a GAAP-measured profit. For the company's investors, meanwhile, a big win might be interpreted as getting back to UiPath stock's current 52-week high of around $56.
It's not an impossible dream. UiPath stock jumped 11% on a day when a Russian missile struck Poland, based on the company's SEC filing and on positive PPI news. So clearly, there are buyers out there.
Just understand that UiPath is a former and possibly future growth stock, not a deep-value investment at the moment. The company was recently quoted as having a price-to-sales ratio of 7.5, which isn't exactly a basement bargain. Moreover, UiPath lacks a trailing P/E ratio, a fact that won't likely endear the company to many metric-focused traders.
So, some investors may choose to redefine a "big win" and extend their time horizons to the end of 2023. With that in mind, interested parties can participate in Hedberg's enthusiasm as UiPath becomes leaner and its bottom-line metrics hopefully turn greener.
