Symbotic (SYM 0.17%) and UiPath (PATH 1.54%) both help companies streamline tasks and cut costs by automating tasks with artificial intelligence (AI). Symbotic processes pallets and cases in large warehouses with its automated robots and software, while UiPath plugs its AI algorithms into a company's software to automate repetitive jobs like entering data, processing invoices, and onboarding customers.
Both stocks have gone on wild rides since their public debuts. Symbotic went public by merging with a special purpose acquisition company (SPAC) in June 2022. Its stock opened at $10.54 on the first day and soared to record high of $63.54 on July 31, 2023, but it now trades at about $44.
UiPath went public at $56 in an initial public offering (IPO) in April 2021, hit its all-time high of $85.12 a month later, but is now worth just $22.
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Investors have clearly been more bullish on Symbotic than UiPath, but is the former still a better investment than the latter? Let's take a fresh look at both AI stocks to decide.
Investors shouldn't ignore Symbotic's biggest challenges
Symbotic claims a $50 million investment in just one of its modules (which include its robots and software) can generate $250 million in lifetime savings for warehouse operators over a 25-year period. Its two biggest backers are SoftBank, which owns the SPAC that Symbotic initially merged with, and Walmart.
Symbotic's top customer is also Walmart, which accounted for 88% of its revenue in fiscal 2023 (which ended last September). Its other major customer is GreenBox, a new warehouse-as-a-service joint venture it set up with SoftBank last year. The company's heavy dependence on its biggest backers is worrisome, but it's gradually diversifying its customer base with new deals with Target, Albertsons, and C&S Wholesale.
Symbotic's revenue soared 136% in fiscal 2022 and grew another 98% to $1.18 billion in fiscal 2023. It also narrowed its loss under adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) from $90 million to $18 million.
For fiscal 2024, analysts expect its revenue to rise 48% to $1.74 billion with a positive adjusted EBITDA of $99 million. That growth is impressive, but its stock isn't cheap at 15 times this year's sales.
That valuation might be reasonable if Symbotic continues firing on all cylinders, but investors can't ignore its customer concentration issues and its lack of a meaningful moat against other warehouse automation companies.
UiPath needs to overcome some existential challenges
UiPath is the world's largest developer of robotic process automation (RPA) tools. Its revenue surged 81% in fiscal 2021 (which ended in January 2021) and rose 47% in fiscal 2022. The pandemic drove more companies to adopt its RPA tools to replace human workers, automate repetitive tasks, and streamline their spending.
But in fiscal 2023, its revenue only grew 19% as inflation, rising rates, geopolitical conflicts, and other macro headwinds drove companies to rein in their spending. Its revenue rose 24% in fiscal 2024 as some of those headwinds dissipated.
UiPath is still bleeding red ink on the basis of generally accepted accounting principles (GAAP). But it turned profitable on a non-GAAP (adjusted) basis in fiscal 2022, and its non-GAAP net income rose 78% in fiscal 2023 and surged 286% in fiscal 2024. Those bottom-line improvements were driven by its layoffs and other aggressive cost-cutting.
Analysts expect UiPath's revenue and adjusted earnings per share (EPS) to grow 19% and 6%, respectively, in fiscal 2025. Those growth rates are steady, and its stock doesn't seem terribly expensive at 36 times forward earnings and 8 times this year's sales.
Nevertheless, UiPath still needs to overcome some tough existential challenges over the next few years. New generative AI platforms like OpenAI's ChatGPT could enable companies to automate their office tasks without UiPath's RPA tools, while tech giants like Salesforce and Microsoft are gradually integrating more RPA services into their cloud-based ecosystems.
The better buy: UiPath
I wouldn't rush to buy either of these volatile stocks right now. But if I had to choose one over the other, I'd stick with UiPath because it dominates its niche market, it doesn't have any major customer concentration issues, and its stock looks cheaper. I wouldn't touch Symbotic unless it meaningfully broadens its customer base and scales up its business.
