The Tale of Path’s Remarkable Growth
Path, taking a different road from its competitors, has defied the market norms over the last two tumultuous years. The market, akin to a roller coaster, witnessed both consistent dips and sharp ascensions, but none have triumphed quite like UiPath. Despite the cloud ETFs experiencing contrasting fates, Path has soared, leaving its peers in the dust. However, it’s crucial to note that while Path’s shares have witnessed a commendable surge, they still lag far behind their levels of two years ago.
“Have Path shares run too fast and too far?” This is the question that lingers in the minds of many. The recent rally seems to be predicated on the hope of diminishing inflation and lower interest rates. However, the future remains uncertain, and predictions about the course of the market are rife with contradictions. Market observers are split between conflicting forecasts, with no prevailing consensus in sight. The immediate future for high-growth IT shares, including UiPath (NYSE:PATH), seems enshrouded in mystery. It’s expected that these shares, including Path, will soon encounter a period of consolidation due to the prevailing uncertainties.
In line with expectations, Path shares have finally embarked on the anticipated phase of consolidation. With the New Year came a swift decline in Path shares, providing investors with a potential entry point. Despite this, attempting to forecast the macro influences that will significantly impact PATH’s share price in the coming weeks would be an exercise in futility.
However, this article doesn’t dwell on short-term market maneuvers. Instead, it focuses on the operational performance and valuation of Path over the next 12 months. Counting on a crystal ball is futile, so the valuation of UiPath shares will undoubtedly hinge on the evolving high-growth IT market in 2024. The stage for appreciable growth in Path shares can only be set against a backdrop of a congenial market environment for high-growth IT shares. Guided by these dynamics, UiPath is poised to surpass current consensus forecasts, as outlined in this article.
Last quarter, Path’s revenue growth and year-on-year growth of the ARR balance reached an impressive 24%, with net new ARR growing by 15% sequentially. Notably, the company’s free cash flow margin stood at about 13%. It also raised its expected year-end ARR and increased its forecast for non-GAAP operating income. Surprisingly, the 1st Call consensus for 2024 revenue growth fell below 20%, suggesting a potential slowdown in growth. However, the company’s backlog (RPO balance) revealed a contrasting indicator regarding Path’s actual growth momentum.
Path’s performance didn’t solely hinge on revenue. The sequential growth in ARR additions, albeit a second-order figure, indicated a shift in market efficiency. The company’s go-to-market focus on acquiring larger customers with a higher propensity to grow yielded fruit, manifesting in a constant currency, dollar-based net expansion rate of 123% in the quarter.
Ashim Gupta
Yes, I would just say, Mark, we’re really pleased with our performance and the team’s execution. We are focused on closing out a good year-end here. And the teams are really focused on that. And we look at our fourth-quarter guidance just putting the right prudence and the right macroeconomic variability included in our guidance, and we’ll update as we get closer to next year.
In this very uncertain environment, the company has taken an appropriately conservative path
