The U.S. stock market had an impressive run in 2023, with the S&P 500 and Nasdaq Composite posting gains of 24.2% and 43.4%, respectively. Although the stock market seems to have started with a correction in 2024, a strong earnings season and upcoming interest rate cuts may boost it further in 2024.
With artificial intelligence (AI) being the hottest investment theme in 2023 and expected to persist in 2024, it makes sense to ride this wave under a friendly market backdrop. Investors don't even need boatloads of money to make this move. If you have even $500 which you don't need for paying down bills or for contingencies, then picking up small stakes in UiPath (PATH 0.26%) and Roblox (RBLX 1.35%) could prove to be a smart move.
UiPath
A leading robotic process automation (RPA) player, UiPath helps clients automate repetitive tasks to increase overall efficiency and enables employees to focus on creative and strategic responsibilities. The company also leverages artificial intelligence and communication mining technologies (analyzing all forms of communication) to identify more business processes suitable for automation.
UiPath has differentiated itself from competition by tailoring its automation solutions to specific industries. The company focuses on playbooks, marketing events, and enablement programs to support its team in understanding the unique automation requirements of various industries. The targeted solutions are helping the company attract high-value clients, as evidenced by the 31% year-over-year rise in customer count with annual recurring revenue (ARR) of $1 million or more to 264, at the end of the third quarter.
UiPath has also strategically collaborated with several major companies, such as Amazon and SAP, to integrate its automation offerings with a broader partner ecosystem. These partnerships not only help attract new customers and improve user engagement, but also make it easier for them to deploy automation solutions. UiPath considers the partners and global service integrators as an important part of its go-to-market strategy, helping the company scale its customer base in an efficient, scalable, and cost-effective manner.
UiPath also posted impressive numbers in the third quarter of fiscal 2024 (ending Oct. 31, 2023), with revenue growing 24% year over year to $324 million, and non-GAAP (adjusted) earnings per share (EPS) of $0.12. The company also reported an impressive dollar-based net retention rate of 121%, meaning that existing customers spent 21% more on its offerings as compared to that in the same quarter of the prior year.
Polaris, a market research firm, estimates the global RPA market to grow at an annual compound average growth rate of 38.2%, from $3.6 billion in 2023 to $66 billion by 2032. With its advanced cutting-edge automation technology and robust commercialization strategy, the company seems well positioned to leverage this opportunity over the next few years.
Roblox
A prominent social entertainment player, Roblox enables players to create, host, and participate in hordes of different games and activities across virtual worlds. However, investors do not consider the company as a mere gaming platform. With its focus on leveraging AI and machine learning technologies to provide interactive and immersive experiences, the company is also seen as a prominent metaverse player.
While the metaverse opportunity may take a few years to contribute meaningfully to the company's revenue, Roblox's core business remains strong -- marked by record user engagement levels, impressive sales growth, and improving operating margins despite being unprofitable. In the third quarter, the company posted a 20% year-over-year rise in number of total hours of engagement to 16 billion, while revenue rose 38% year over year to $713.2 million.
Roblox is striving to make its platform accessible across age cohorts and devices. The company is also focusing on expanding into international markets such as Japan, Brazil, Germany, and India. Since the company earns the bulk of its revenue from user subscriptions and in-game purchases, an expansion in the user base can directly translate into more revenue.
Further, Roblox is also allowing game developers on its platform to offer subscriptions to users within their created virtual worlds. This move makes the platform more attractive for existing and new developers, while also increasing user engagement. Roblox also has access to huge data sets about social graph, context and nuance-rich voice communication (social relationships and voice communication among users on the platform), and a large collection of functional online 3D objects on the platform. This data is further helping Roblox create a complex, vibrant, and immersive virtual economy. This, in turn, creates more opportunities for brands and users to interact on the platform, thereby opening up multiple avenues for advertising.
Roblox is further leveraging AI technologies to enhance the safety of the platform and improve overall user experience through content moderation and avatar customization. Hence, while advertising is still a small part of the company's revenue mix, these initiatives can help unravel the opportunity.
Considering the growth prospects of these potential revenue streams, the company seems to be an attractive pick for 2024.
