UBS Initiates Coverage on UiPath Inc (NYSE:PATH) with 'Sell' Rating

UBS has begun coverage of UiPath Inc, assigning it a "sell" rating due to increasing competitive pressures and a challenging market environment that may hinder growth.

Competitive Landscape

As a leader in robotic process automation (RPA), UiPath is facing stiff competition from major tech firms like Microsoft and ServiceNow, which incorporate automation features into their broader software offerings. Furthermore, UBS pointed out the growing threat from AI startups and large language model providers, which could potentially undermine UiPath’s advantages in automation.

Customer Growth Concerns

Since late 2022, customer growth has stagnated, particularly after the introduction of ChatGPT. UBS has observed no significant improvements in net retention rates or performance gains from UiPath's recent organizational restructuring, leading experts to express doubts about the RPA market's overall growth potential.

Revenue Growth Outlook

UBS anticipates that UiPath's annual recurring revenue (ARR) growth will fall short of market expectations through 2026, with additional downside risks on the horizon. The brokerage is especially concerned about UiPath's capability to attract new enterprise customers in a market increasingly favoring consolidated vendor solutions.

Price Target Assessment

Considering the structural and market challenges faced by the company, UBS has set a price target of $14 for UiPath, which is significantly below its current trading range.