On Thursday, Morgan Stanley adjusted its outlook on shares of UiPath Inc. (NYSE: NYSE:PATH), increasing the price target to $25 from the previous $17, while maintaining an Equalweight rating. The revision follows UiPath's reported earnings, which showcased a robust 6% revenue beat, primarily driven by license performance.
The company's Annual Recurring Revenue (ARR) growth of 22% year-over-year surpassed expectations, contributing to notable margins and free cash flow (FCF) improvements.
UiPath's recent financial results have evidently outperformed market consensus, with the company setting forward targets that suggest an 18% year-over-year growth in ARR for the fiscal year 2025. Additionally, the midpoint of the net new ARR (NNARR) growth is projected to be around 1%. The automation software company's stronger-than-anticipated performance has led to this revised assessment by Morgan Stanley.
The update comes as UiPath's ARR—a key metric indicating the value of the company's subscription-based products—has shown significant growth, which is a positive sign for its recurring revenue stream. The ARR's growth rate is a critical indicator of UiPath's financial health and its ability to expand its customer base and retain existing clients.
The firm's analysis suggests that UiPath is on a trajectory to continue its growth momentum, with forward-looking targets indicating sustained increases in its ARR. This growth is reflective of the company's ability to exceed market expectations and deliver financial results that bolster investor confidence.
Morgan Stanley's maintained Equalweight rating implies that the firm believes UiPath's stock is valued appropriately relative to its earnings, growth potential, and risk profile.
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