UiPath’s (NYSE: PATH) accelerating growth led the market for its stock higher over the last twelve months, and the trend continues following the Q4 results. The results were better than expected, with growth accelerating sequentially and YOY setting a record compounded by wider margins and the first quarter of GAAP profits. 

Because the gains were driven by new business and penetration of existing clients, momentum is expected to continue this year, and the analysts are making revisions. The guidance for Q1 is weak but potentially cautious, and the outlook for the year is robust, leading them to raise their price targets. The company forecasts sequential growth throughout the year with new records in sight. 

UiPath’s High-Margin Business Outperforms Consensus Estimates

Growing demand for AI-powered enterprise automation software led UiPath to a solid quarter. The company produced $405.25 million in net revenue for a gain of 31.45% over last year. This is up from the prior quarter’s 25% growth and the preceding year’s contraction. Revenue is at a new record and beat the Marketbeat.com consensus by 560 basis points. 

UiPath’s critical segments grew by double digits, with Licenses growing by 38% and subscriptions by 27%, offset by a 16% decline in Professional Services. The decrease in Professional Services is a red flag but is mitigated by segment size. Professional services make up 2% of the business and are not a significant driver. 

The margin news is good. The company widened the margin at the gross and operating level and on a GAAP and adjusted basis to reverse GAAP losses in the prior year and grow adjusted earnings faster than revenue. The adjusted gross margin grew about 200 basis bps to 89%, with adjusted operating margin at 27.2%. Adjusted earnings of $0.22 are up 47% YOY and beat by 3750 bps; free cash flow is up 36% to $146 million. 

Will UiPath Stock Grow In 2024?

Internal metrics and guidance favor solid results this year. The company’s ARR grew by 22%, with net retention at 119%, as the customer base grows and penetration deepens. Regarding guidance, the company expects a seasonal downturn in sequential growth but for the year to be strong. 

The $330 to $335 million revenue forecast for Q1 is well below the $347 million consensus figure but potentially cautious given the company’s momentum. As for the year, the company forecasts $1.55 billion in net revenue at the range's low end, above consensus, with growth accelerating sequentially. 

Factors suggesting outperformance include the launch of Autopilot, new developer features, a DOD contract, and expanded partnerships with Google and  Deloitte. Autopilot delivers productivity-enhancing tools that were highlighted at the company’s developer conference. The DOD contract validates the software as effective for government use, opening the door to follow-up business. Partnerships with Google and Deloitte will bring UiPath’s functionality to more enterprises, facilitating an easier transition to automation. 

Is UiPath Well Capitalized? 

UiPath’s business is well-capitalized and has a positive cash flow, so there are no red flags on the balance sheet for investors. Highlights of the Q4 report include $1.9 billion in cash and equivalents, virtually no debt, and increasing equity. Equity is up by 5% and is expected to improve again in 2024. The risk for shareholders is dilution. The share count increased by 5% with share-based compensation but was partially offset by share repurchases.

Will UiPath Analysts Ratings Rise Because of 2024 Guidance?

The analysts are already raising their ratings and price targets for this stock. Marketbeat is tracking nearly a dozen updates following the release, including two upgrades to Overweight and numerous price target revisions. The revisions are all upward, and the consensus is moving higher. Consensus has the market moving about 5% lower, but most fresh targets are above it in the range of $25 to $30. A move above $27.50 would be significant and set a new long-term high, opening the door to a complete reversal for this market. In that scenario, shares of UiPath could advance 50% to 100% over the following few quarters.