Investing in stocks south of the border can help you diversify your portfolio and reduce portfolio risk. The U.S. is the largest economy in the world and provides you with access to some of the most innovative companies globally.
One such beaten-down tech stock is UiPath (NYSE: PATH), which is valued at US$7.2 billion by market cap. Canadian investors can easily invest in U.S. stocks such as UiPath by opening accounts in new-age discount brokers, including Wealthsimple. Let’s see why I’m bullish on the tech stock right now.
An overview of UiPath stock
UiPath provides an automation platform that offers a range of robotic process automation (RPA) solutions to enterprises. Its suite of software solutions helps companies build, manage, run, engage, and measure automation within the organization.
UiPath’s platform integrated artificial intelligence, machine learning, and natural language processing capabilities to improve decision making and information processing.
While AI stocks such as Nvidia and Super Micro Computer have delivered game-changing returns to shareholders in the last 18 months, UiPath has massively underperformed, as its shares are down 85% from all-time highs.
How did UiPath perform in fiscal Q1 of 2025?
In the fiscal first quarter (Q1) of 2025 (ended in April), UiPath reported revenue of US$335 million, up 16% year over year. Its annual recurring revenue, or ARR, stood at US$1.508 billion, up 21%, while the dollar-based net retention rate was 118%. It suggests that UiPath’s existing customers raised spending by 18% in the last 12 months.
In the last two years, UiPath’s ARR has grown by more than 24% annually. A widening base of recurring revenue should help UiPath generate stable cash flows across market cycles. With a gross margin of 86%, UiPath ended Q1 with an operating income of US$50 million and a free cash flow of US$101 million.
In Q1, UiPath inked a partnership with Microsoft through the integration between the UiPath Business Automation Platform and the former’s Copilot. The integration should enable joint customers to automate processes and enhance end-user experiences. UiPath is among the first ecosystem partners for Copilot for Microsoft 365 and Teams.
The number of customers spending over US$100,000 annually on the UiPath platform has risen from 1,858 to 2,092 in the last 12 months, while the number of customers spending more than US$1 million in annual spending has grown from 240 to 288.
Is UiPath stock undervalued?
UiPath estimates sales of US$1.4 billion in fiscal 2025. Given a margin of 30%, its free cash flow should total US$420 million this year. So, the tech stock is priced at 17 times forward free cash flow, which is quite cheap.
Moreover, UiPath is forecast to report an adjusted earnings per share of US$0.38 per share in fiscal 2025, compared to US$0.54 per share in 2024. However, it is forecast to end fiscal 2029 with an adjusted earnings per share of US$2.35 per share. So, if the stock trades at 25 times forward earnings, it should be priced around US$59, significantly higher than the current trading price of US$12.5.
Out of the 24 analysts covering UiPath stock, 12 recommend “buy” and 12 recommend “hold.” The average 12-month target price for PATH stock is US$16 — 26% above the current trading price.
