UiPath (PATH) rallied 46.3 percent in August before giving back 16.6 percent on Sept. 4 following earnings—a sell-the-news move that leaves the stock undervalued for investors with conviction on AI disruption risk.
The August surge reflected a sector-wide rebound in enterprise software. Sell-side analysts at RBC Capital raised price targets mid-month on better-than-expected Q2 results across AI, cybersecurity, infrastructure and data coverage. Salesforce's (CRM) beat on Aug. 26 accelerated momentum into month-end.
UiPath reported solid fiscal Q2 results on Sept. 3: revenue rose 13.3 percent to $410.2 million, beating expectations. Guidance for the current quarter also exceeded consensus. The problem? Adjusted EPS held flat year-over-year at $0.15—meeting forecasts but offering no upside surprise. That miss spooked momentum traders.
The pullback created a mispricing. UiPath trades at approximately 4x current annualized recurring revenue and 3.4x enterprise value-to-ARR. For a SaaS company posting double-digit growth, strong unit economics (83 percent gross margins), positive free cash flow and $1.3 billion in cash with no debt, that valuation looks cheap.
Investor concern centers on agentic AI and whether enterprises will build internal automation tools rather than buy from vendors. That fear is real but overpriced into the stock. UiPath's resilient Q2 revenue—delivered as Claude code and similar tools gained traction—suggests the market for RPA and enterprise automation remains intact. The company is adapting, not being displaced.
Watch for EPS growth to accelerate in coming quarters. If management can show adjusted earnings expanding even modestly alongside 13 percent revenue growth, the stock re-rates higher. Current valuation leaves room for a 25-30 percent move if the company executes.
