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Unveiling the Potential: An Exploration of UiPath and Unity in the Arena of AI Software Stocks

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The allure of artificial intelligence (AI) stocks remains potent in 2024, with investors eagerly captivated by the prospect of a burgeoning AI industry poised to attract substantial investments in the coming decade. While the limelight often shines on industry giants like Nvidia (NVDA), Microsoft (MSFT), and Alphabet (GOOGL), there exist lesser-known AI stocks flying under the radar, potentially harboring groundbreaking prosperity for shareholders in 2024 and beyond.

Delving into UiPath: A Tale of Enterprise Automation

UiPath (PATH) stands as a beacon in the realm of enterprise automation, catering to diverse sectors such as healthcare, telecom, finance, and banking.

With a market capitalization of $13 billion, UiPath stock currently hovers at 74.5% below its historical peaks. Despite this, driven by the optimism surrounding AI stocks, PATH has surged by an impressive 35% over the past six months.

UiPath specializes in automating processes like accounts payable, claims processing, and financial operations. At the forefront of robotics process automation (RPA), UiPath is integrating AI capabilities across all RPA phases. Projections from Grand View Research anticipate the RPA market to reach $30 billion by 2030, providing UiPath with a substantial growth runway, considering it raked in $1.31 billion in revenue in fiscal 2024 (ending January).

Unlike numerous AI growth equities, UiPath boasts consistent profitability, reporting adjusted earnings of $0.22 per share in fiscal Q4 of 2024, outstripping estimates. Anticipating sales of $1.56 billion in fiscal 2025 and adjusted free cash flow of $350 million, UiPath envisions a 22% margin, maintaining a positive trajectory.

Among the 18 analysts monitoring UiPath stock, seven advocate a β€œstrong buy,” one proposes a β€œmoderate buy,” while ten recommend β€œhold.” The average target price for UiPath stock is $25.71, indicating an upward potential of 11.1% from current levels.

Exploring Unity Software Stock: Unveiling the Gaming Frontier

Valued at $10 billion, Unity Software (U) stock reflects an 87% decline from its peak in March 2021. Specializing in video gaming software, Unity offers solutions for creating, running, and monetizing interactive content across various platforms.

Unity revealed Q4 2023 revenue of $451 million, surpassing estimates of $395 million. While narrowing its total losses to $254 million ($0.66 per share) from $299 million in the previous year, analysts anticipated a slimmer loss of $0.45 per share.

Opting to slash costs over the last year to counterbalance a deceleration in top-line growth amidst a challenging economic climate, Unity tightened its expenditure, resulting in a reduced net loss of $826 million in 2023 compared to $921 million in 2022.

With an adjusted EBITDA margin catapulting from 5% to 30% in Q4 of 2023, Unity Software epitomizes resilience. Despite analysts predicting a 16.8% sales decline to $1.82 billion in 2024, Unity is steadfast in its commitment to growth.

Of the 19 analysts tracking Unity stock, six advocate a β€œstrong buy,” one suggests a β€œmoderate buy,” ten prefer β€œhold,” and two advise β€œsell.” The average target price for Unity stock stands at $30.83, signaling an upward potential of 17% from current levels.

Although analysts lean towards Unity’s potential at current levels compared to UiPath, a cautious approach is recommended owing to Unity’s substantial earnings miss. With the journey of Unity stock witnessing a retreat of approximately 20% from its pre-earnings closing price above $33, investors are urged to exercise prudence.

On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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