Up 30% in Just the Past Month, Is Now the Time to Buy UiPath Stock?

UiPath's (NYSE: PATH) business centers around automating and leveraging artificial intelligence (AI) to save users time. It's the type of stock that you might expect to do well during an AI revolution.

Last year, however, it lost nearly half its value. And this year wasn't looking like it would be a strong one for the tech company either, until a recent rally changed all that. What's been behind UiPath's sudden surge? And could it be a sign that the company is finally winning over growth investors?

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Could UiPath be a winner in AI agentics?

In the early innings of AI, the hype and excitement was all about chatbots and using them to help with computations, writing emails, and creating photos. But as AI has evolved, it has been able to take on more complexity. Take AI agents, which can deploy multiple tasks, such as booking a trip that considers all your requirements, your budget, and then search for and book flights and hotels.

It's in these multistep agentic processes where UiPath has risen in popularity. Its software can enable companies to manage agents and put necessary guardrails in place to protect the business, its customers, and its data. Enterprise agentic AI is a big growth opportunity, with analysts at Grand View Research projecting it will be worth $24.5 billion by 2030, implying a compound annual growth rate of more than 46% until then. With that kind of massive growth, UiPath's stock could have incredible upside -- if it's able to execute successfully.

The business still faces significant challenges

There's plenty of promise for UiPath and bullish investors in the opportunities ahead. UiPath recently announced collaborations with several top AI companies, including Nvidia and OpenAI. But the big question is whether this will lead to significant growth for the company, and more importantly, whether it can help UiPath get out of the red.

Over the six-month period ended July 31, the company's revenue increased a fairly modest 10%, totaling $718.4 million. And while its net loss declined to just under $21 million over the past two quarters (versus a loss of $115 million in the first half of last year), its bottom line doesn't look terribly strong despite the company achieving a gross profit margin of more than 80%.

The tech stock looks cheap based on a forward price-to-earnings multiple of 17, but that's based on analyst expectations. Investors may be jumping the gun in assuming that UiPath will be able to turn large enough profits to be a big winner due to AI.

I'd hold off on investing in UiPath right now

Shares of UiPath have been soaring in the past month, but in recent days investors have also been cashing out as the stock has been starting to show signs of weakness again. There looks to be a heavy degree of speculation around UiPath of late as there hasn't been a significant catalyst to explain the recent wave of bullishness. That can make the stock vulnerable to a correction.

The safest option for investors at this stage is to take a wait-and-see approach with UiPath. There's still ample risk with the business because there are many competitors in the space and without a clear and strong competitive advantage, UiPath may have a hard time in growing its business at a high rate, while also being profitable. There's been excitement around the business and AI in the past, and it hasn't paid off.

Until and unless the company can demonstrate that this time is different and that it can be profitable on a consistent basis while also achieving a much higher rate of growth, I'd wait on the sidelines. UiPath still has a lot to prove.

David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and UiPath. The Motley Fool has a disclosure policy.