Ark Invest Stock Portfolio: Top 10 Picks

8. UiPath Inc. (NYSE:PATH)

Number of Hedge Fund Investors  in Q1 2024: 33

Ark Investment Management’s Q2 2024 Stake: $377 million

UiPath Inc. (NYSE:PATH) is a software company that enables businesses to automate their processes. Another enterprise software company, its hypothesis is primarily dependent on revenue growth, robust margins, and customer growth. These three factors made it unsurprising that UiPath Inc. (NYSE:PATH)’s shares tumbled by a whopping 34% in May 2024. This share price drop came after the firm’s first quarter earnings report which revealed that UiPath Inc. (NYSE:PATH)’s Q1 2024 revenue of $355 million beat estimates by a hairline of 0.6%. At the same time, the firm also cut its FY2025 guidance by 10% to $1.4075 billion and announced a 10% labor force cut. Naturally, investors were spooked since slowing revenue and lower employees meant that UiPath Inc. (NYSE:PATH) might be unable to position itself for growth in the AI era. These woes were further compounded by the fact that the firm’s deal duration appeared to be shortening, which doesn’t bode well for the fourth key tenet of software stock valuation, i.e., recurring revenue.

UiPath Inc. (NYSE:PATH)’s management commented on the shortening deals during its Q1 2024 earnings call. Here’s what it said:

“Yes. I think that around six, seven weeks ago, we were starting to see some pressure, especially on the large multiyear deals. Some of them got shrank. Some of them got postponed. We are not seeing the cause as being from a competitive standpoint. But it’s — I think it’s a combination of factors, macro-economical environment is variable and customers are a bit more cautious, and they do more scrutiny into the deals. Another factor for us was a change in the sales comp that happened at the beginning of this fiscal year. And we incentivized a little bit less the multiyear deals, which in retrospect, it was an execution issue. And also, I would say, for us, some late-stage deal execution challenges were identified.

We had some — to give you some examples, some kind of, in one deal, it was procurement error that happened late into the quarter. Another deal, it was a budget reprioritization that we got, were a little bit too late in the quarter.”