Investing in artificial intelligence (AI) stocks has been a great move for investors this year. And one stock that helps companies automate their processes is UiPath (PATH 0.04%). Its software makes it easy for organizations to automate routine tasks and generate reports. With a wide appeal and many potential use cases, business has been booming lately for UiPath.
The big question, however, is after already gaining an impressive 90% this year, is the stock still a good buy heading into 2024, and can its shares continue rising?
NYSE: PATH
Key Data Points
Is UiPath's stock overpriced?
UiPath is an unprofitable company; it incurred losses totaling $363.8 million over the trailing 12 months. But it is posting strong revenue growth, and with gross profit margins in excess of 80%, there's hope that as sales rise, the bottom line can finally get into the black.
And concerning sales, an argument could be made that UiPath looks cheap -- but only if you're comparing it to 2021's elevated prices.
PATH PS Ratio data by YCharts
Analysts believe that the stock may have already peaked. According to the consensus analyst price target of just under $22, Wall Street analysts believe the stock could fall by 10% from where it trades at right now. This is even as many analysts have been upgrading their price targets for UiPath this month. The stock may simply have risen too quickly for the Street.
The caveat, however, is that analyst price targets typically look at only where the stock may head in the next year or so; they don't factor in longer-term returns. And where it goes could depend on the strength of its growth rate.
UiPath's growth rate accelerated this year
UiPath went soaring out of the gate in 2021 when its shares went public. Then, things started to slow down as it went up against stronger comparables. But in recent quarters, the company's growth rate has been accelerating again, as demand due to the growing popularity of AI has led to more interest in automation.
Data by YCharts.
For the company's fourth quarter of fiscal 2024 (which ends in January), UiPath projects sales will come in between $381 million and $386 million. That would suggest at least a 24% increase from the $308.5 million the company reported in Q4 last year.
The key could be how strong the company's guidance looks next year, and whether the growth rate will stall or whether it will accelerate.
Is UiPath a good buy heading into 2024?
UiPath's stock is performing well this year but given that its shares fell by 71% in 2022, it's simply recouping losses for investors. Since going public in 2021, UiPath's stock is still down 64% overall. Even sustaining a 20% growth rate could keep investors bullish on the stock next year. But with companies looking for ways to get leaner and trying to introduce automation into their businesses, I'm optimistic that UiPath's growth rate can still improve, and that profitability is a realistic expectation for investors in the long run.
The tech stock looks as though it should be able to continue rising in 2024 given the hype surrounding AI doesn't appear to be slowing down anytime soon. For investors willing to take on some risk, UiPath could be an excellent stock to buy right now.
