With U.S. inflation coming in a hair better than expected, the U.S. Federal Reserve (or the Fed), as well as the Bank of Canada (BoC), may just be able to cut interest rates a bit more aggressively. Lower interest rates could spell good news for the Canadian economy.
For smaller-cap tech companies such as UiPath (NYSE: PATH), markedly lower rates could be an even larger boon. Undoubtedly, speculative tech companies have been quite out of favour recently, thanks in part to elevated borrowing costs.
As you may know, higher rates tend to hurt the firms that spend a great deal on research and development (R&D). Additionally, if these tech firms under question aren’t yet profitable (or are barely treading water on the front of profits), higher interest rates can act like a punch to the gut. As rates come down, questions linger as to whether such unprofitable hyper-growth stocks can catch a bid higher again. Just a few weeks ago, we saw that investing in tech is more about the biggest and brightest stars in the tech scene.
I have no idea if the mid-cap tech plays have more room to run. And though lower rates could be a major plus, the firms themselves need to start making progress on the front of margins. Not to mention, they still need to command respectable double-digit growth rates to win over new investors who may still be inclined to go for the bigger tech names out there.
Tough sledding for PATH stock
UiPath stock stands out as one of the most battered disruptive innovation tech stocks out there. It’s a stock held within some of Cathie Wood’s Ark Invest funds. And it’s one that’s really dragged on the performance front, with the stock collapsing more than 55% in the past six months. Since its peak, shares of PATH have now shed more than 85% of their value.
Things seem to be looking increasingly nasty following the recent 10% layoff (around 420 jobs lost) and the sudden, unexpected departure of its top boss, Rob Enslin.
Indeed, some big change needs to be made over at the workplace automation software firm. Though it does have plenty of artificial intelligence (AI) potential, I think it’s safe to say that management has really dropped the ball when it comes to execution.
How to buy PATH stock?
For Canadians seeking deep value, PATH stock may be worth consideration while it’s down and out. Depending on your brokerage, you can buy shares on the NYSE as you would any other U.S. stock. To pick up shares of the name, though, you’ll have to exchange your Canadian dollars (CAD) for greenbacks. You’ll have to pay your bank or broker a fee for the currency exchange. Additionally, given today’s unpleasant CAD-to-U.S. dollar rates, you probably won’t get too big a bang for your buck.
Personally, I wouldn’t look to make a huge bet on PATH stock here. It may seem dirt-cheap after shedding over 85% of its value. But until it can start taking control of the revolving door at the very top, I’d not be in a rush to load up on the name.
There are far better AI plays out there, in my opinion, some of which don’t require you to venture into the U.S. market.
