UiPath (PATH -3.47%) became one of the largest software initial public offerings (IPOs) ever upon its public debut on April 21, 2021. The robotic process automation (RPA) software developer priced its stock at $56, but it closed at $69 on its first day and rallied to its all-time high of $85.12 on May 24, 2021. At its peak, UiPath had an enterprise value of $41.3 billion — a whopping 46 times the revenue it would actually generate in fiscal 2022 (which ended in January 2022).
But today, UiPath only trades at about $19 per share, with an enterprise value of $8.8 billion. The bulls rushed for the exits as macroeconomic headwinds curbed its growth and rising interest rates popped its bubbly valuations. But after that steep drawdown, UiPath’s stock now looks more reasonably valued at 7 times this year’s sales — and Cathie Wood’s Ark Invest continues to accumulate more shares of this out-of-favor stock for its exchange-traded funds (ETFs).
Assuming you had $50,000 to invest right now, could UiPath generate a 20-bagger return to become $1 million? Let’s examine UiPath’s previous growth rates, near-term estimates, and long-term growth potential to see if it’s possible.
How fast is UiPath growing?
The company’s RPA software robots can be integrated into an organization’s existing software infrastructure to automate repetitive tasks like entering data, processing invoices, onboarding customers, and sending out mass emails. The market’s demand for its RPA services is rising as more companies undergo digital transformations to improve efficiency and cut costs.
Between fiscal 2020 and fiscal 2023, UiPath’s annual revenue rose at a compound annual growth rate (CAGR) of 47%, from $336 million to $1.06 billion. But from fiscal 2023 to fiscal 2026, analysts expect its revenue to grow at a more moderate CAGR of 19% and reach $1.77 billion in revenue by the final year.
That slowdown can be attributed to the recent macro headwinds, which caused many companies to rein in their spending on sweeping software upgrades. There’s also been competition from similar services like Microsoft‘s Power Automate, Salesforce‘s MuleSoft RPA, and appian RPA.
That forecast implies UiPath could grow slower than the broader RPA market, which Fortune Business Insights expects to expand at a compound annual growth rate (CAGR) of 23% between 2022 and 2029. We should take all of those estimates with a grain of salt, but it wouldn’t be surprising to see UiPath — which established a first-mover’s advantage in the RPA space — it gradually loses its momentum as its larger tech competitors expand into its backyard.
Those tech giants could also integrate new generative artificial intelligence (AI) tools (like ChatGPT) into their own software to eliminate the need for third-party RPA services like UiPath. According to Reportlinker, the global generative AI market could still expand at a CAGR of 36% between 2023 and 2030. Nevertheless, UiPath insists it will benefit from that market’s secular expansion by upgrading its own software robots with generative AI tools.
Could UiPath become a 20-bagger gain?
To grow its annual revenue 20-fold to $21.2 billion over the next 10 years, UiPath would need to grow its top line at a CAGR of 35%. To achieve that goal in 20 years, it would need to grow its annual revenue at a CAGR of 16%.
The latter target seems more realistic, yet it could still be tough to achieve as new competitors and technologies transform the RPA market. But if UiPath’s annual revenue actually rises to $20 billion, it would likely expand its ecosystem with more investments and acquisitions along the way. That expansion would make UiPath a more diversified tech giant like Salesforce — which only crossed the $20 billion mark in fiscal 2021 (which ended in January 2021) — in the distant future.
In other words, UiPath might turn $50,000 into $1 million, but it could take at least two more decades. It’s also a best-case scenario that sees UiPath weathering the competitive threats, expanding, and evolving into a much larger tech company. If you believe UiPath can accomplish all those things, then it might just be a millionaire-maker stock.
Leo Sun has positions in Salesforce. The Motley Fool has positions in and recommends Appian, Microsoft, Salesforce, and UiPath. The Motley Fool has a disclosure policy.