Stock Story -
What Happened: Shares of automation software company UiPath (NYSE:PATH) fell 5% in the morning session after Macquarie analyst downgraded the stock's rating from Outperform (Buy) to Neutral and lowered the price target from $29 to $12. Some factors driving the analyst's revised outlook include the CEO's sudden departure and the weak guidance provided when UiPath reported earnings.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy UiPath? Find out by reading the original article on StockStory, it's free.
What is the market telling us: UiPath's shares are very volatile and over the last year have had 26 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 4 days ago, when the stock dropped 35.1% on the news that the company reported first quarter earnings results and lowered its full-year revenue guidance, falling significantly short of Wall Street's expectations. The company noted it saw, "increased deal scrutiny and lengthening sales cycles for large multi-year deals." In addition, it observed growth deceleration in the second half of March and into April due to a challenging macroeconomic environment and a change in customer behavior, which likely drove the weak guidance.
Lastly, the company said that the investments made to reaccelerate growth fell short of expectations, making it less nimble when responding to customer needs, and created short-term pressure on operating margins.
Furthermore, CEO Rob Enslin unexpectedly resigned; Founder and current Chief Innovation Officer Daniel Dines reassumed the CEO role on June 1, 2024.
Following the disappointing results, multiple Wall Street analysts downgraded the stock's rating. For example, Bank of America (NYSE:BAC) downgraded the stock from Buy to Neutral and lowered the price target from $30 to $16, highlighting the weakening conviction in the near term given the execution and growth challenges.
Overall, this was a weak quarter for the company, providing little reason for investors to stay positive.
UiPath is down 50.2% since the beginning of the year, and at $11.88 per share it is trading 55.8% below its 52-week high of $26.88 from February 2024. Investors who bought $1,000 worth of UiPath's shares at the IPO in April 2021 would now be looking at an investment worth $171.93.
