Shares of software company UiPath (PATH 1.37%) were up 95.4% in 2023, according to data provided by S&P Global Market Intelligence. The S&P 500 was only up 24% by comparison, showing just how strong the performance of UiPath stock was. That said, UiPath stock didn't meaningfully pull ahead of the S&P 500 until quite late in the year.
This full-year chart shows that UiPath stock got its one major boost at the end of November. Moreover, it shows a more gradual uptick in the stock price in the weeks leading up to the big jump.
For the gradual uptick in price of UiPath stock, investors can look to federal policy regarding interest rates.
On Nov. 1, the Federal Reserve said it was keeping interest rates the same, rather than raise them again. Higher interest rates increase the attractiveness of fixed-rate investments compared with stocks such UiPath. By keeping rates unchanged toward the end of 2023, investors increasingly hope that the Fed will eventually lower rates, boosting the attractiveness of stocks.
UiPath's stock was climbing thanks to these stock market conditions. But then on Nov. 30, the company reported financial results for the third quarter of 2023, sending shares absolutely skyrocketing.
In Q3, UiPath's revenue was up 24% year over year to $326 million, continuing a recent reacceleration in the growth rate for its business. Moreover, the company had free cash flow of $44 million, pushing it to a new record high on a trailing-12-month basis.
PATH Revenue (Quarterly YoY Growth) data by YCharts
Why is this a big deal for UiPath?
UiPath provides businesses with automation software, which can handle repetitive computing tasks, freeing up workers for better things. It's a recognized leader in the space. It also has nearly 2,000 customers spending more than $100,000 annually and 264 customers spending more than $1 million, so it is catching on.
However, UiPath had operated with steep losses. And some questioned whether enterprises were looking to spend more on enterprise software right now. Therefore, as UiPath's growth picked back up and its free cash flow soared, it was able to regain investor confidence, and the stock performed quite well.
UiPath's growth is holding strong
Not only is UiPath's software in hot demand already, but the emergence of generative artificial intelligence (AI) is perhaps providing a new path to growth. UiPath is incorporating generative AI into its software so that businesses can build what they need faster and with greater effectiveness, in theory. Many on Wall Street believe this could provide more upside.
For now, investors look ahead to UiPath's upcoming fourth-quarter results. On the low end of guidance, management believes its revenue will be up 24% year over year. Therefore, exceeding the low end of guidance would represent yet another quarter of accelerating revenue growth. If that happens, it wouldn't be surprising for the market to send the stock soaring again.
