A Fresh Opportunity in Tech: The Leading AI Hypergrowth Stock

I’m trying to recall the name of the little-known company Alexander Green talked about recently. It seems to have flown under the radar—does that ring a bell?

While going through an advertisement by Alexander Green, a key figure at Oxford Club, I stumbled upon some intriguing insights. Curious, I decided to dig deeper on your behalf. The ad was promoting their basic membership, which includes a subscription Oxford Communique for $69 per year. However, what really stood out to me was this particular statement:

He believes that hypergrowth is the common thread between huge past winners as Amazon, Netflix, Apple, and he sees the same potential for hypergrowth here.

What exactly is the focus of this so-called “AI” company? Can you give me some hints?

Who’s the mystery company? Based on the Thinkolator’s findings, it’s likely UiPath (PATH)—a name that has surfaced frequently in AI-related stock discussions. This automation technology firm has been catching the eye of investors, with Eric Wade from Stansberry Research recently naming it his “Number One AI Pick for 2024.”

What makes UiPath a strong contender? The company experienced remarkable revenue expansion, with an average growth growth pace of 47% between 2020 and its fiscal year 2023. However, that rapid growth has decelerated, with revenue climbing 24% last year—an uptick from the prior year’s dip to 19%.

UiPath also boasts a sizable customer base, surpassing 10,800 clients by July of last year.

Uber is among the high-profile companies leveraging UiPath’s automation solutions to cut costs—a partnership highlighted in the company’s promotional materials, including a video citing a $22 million savings figure.

The other 2 examples cited are also notable UiPath’s clients, although I couldn’t find public confirmation of the exact savings figures mentioned. It’s possible that Alexander Green crunched some numbers on his own to arrive at those estimates.

So, what exactly does UiPath do? At its core, the company has built a digital automation suite designed to automate repetitive business processes. As you’d expect, this is a space where AI has the potential to significantly enhance efficiency, speed, and accuracy.

Here’s how UiPath defines its mission:

Here is an overview graphic that explains the functionality behind the Intelligent Workflow System, featuring cute robot mascots.

UIPath is a Software SaaS company that offers automation tools to businesses. The company has been attracting investors due to their real-world AI-powered automation for mundane tasks, strong SaaS key performance indicators, and steady growth in yearly subscription-based revenue. Customer revenue retention rate is also quite impressive, with an average spending increase of 19% per customer. UIPath is now transitioning to profitability, and analysts expect significant profit expansion in the coming few years.

However, UIPath is remains a high-priced investment, trading at nearly 10 times its revenue, and they issue a significant number of stocks to offset their costs. This has led to concerns about the long-term impact on investor gains. Despite this, the company is projected to increase both revenue and earnings by 18-22% in the coming years, and their automation solutions deliver a fast return on investment, making them an attractive investment opportunity for those open to considering adjusted earnings.

UiPath’s growth trajectory suggests it could eventually justify its valuation, but that’s not a given. A common general guideline for high-growth software stocks is that the price-to-earnings multiple shouldn’t exceed twice the expected growth rate. With UiPath projected to grow revenue around 20% annually, a multiple of 40X would be the upper limit of what might be considered reasonable. But even then, that’s a high-end price tag, meaning any slowdown could send the stock lower.

One thing that gives me pause is the forecasted decline in UiPath’s margins in the coming few years—an unusual trend for SaaS firm that should, in theory, be improving profitability as it scales. That uncertainty is why I’ve only taken a limited stake in call contracts rather than a full stake. Still, the company’s progress is worth watching.

What’s your take? Does UiPath have the potential to become a major AI-driven automation leader, or is the stock too pricey? Maybe those small animated assistants aren’t convincing you? Share your thoughts below!