Artificial intelligence (AI) became a new buzzword on Wall Street with the recent massive success of the ChatGPT chatbot. Tech giants are heavily investing in AI, propelling the industry’s growth. Given this backdrop, we take a look at UiPath Inc. (PATH) and C3.ai, Inc. (AI) to see whether they are worthwhile investments now.
The widespread incorporation of AI across a plethora of applications has ushered in a revolutionary impact on every industry, enabling new pathways for decision-making and recognizing patterns. Recently, the AI-powered chatbot ChatGPT, developed by OpenAI, has seized the world’s attention and cast the AI industry into the spotlight.
As a result, tech giants are funneling massive investments into AI research and development, intending to make AI more accessible for enterprise use cases. Notably, tech behemoth Microsoft Corporation (MSFT) has forged a multi-billion-dollar deal in OpenAI to democratize AI as a new technology platform.
The continuous stream of research and innovation is driving growth in the artificial intelligence sector. However, certain companies could struggle to emerge as frontrunners in the AI race due to financial weakness and bleak growth prospects. Hence, avoiding fundamentally weak stocks, PATH and AI might be wise now.
UiPath Inc. (PATH)
PATH offers an end-to-end automation platform with various robotic process automation (RPA) solutions. It provides a suite of interrelated software to enable organizations to design, manage, run, engage, measure, and regulate automation. It serves government, financial, healthcare, and banking institutions.
PATH’s trailing-12-month net income margin of negative 34.99% compares with the 2.86% industry average. Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROTA of negative 19.44%, 10.98%, and 14.48% compare to the industry averages of 4.97%, 3.19%, and 1.47%, respectively.
For the fiscal 2023 third quarter (ended October 31, 2022), PATH’s non-GAAP cost of licenses increased 21.7% from the year-ago value to $2.43 million, while its non-GAAP cost of subscription services increased 36.1% year-over-year to $17.13 million. The company’s net loss and loss per share came in at $57.72 million and $0.10, respectively.
As of October 31, 2022, PATH’s total assets stood at $2.51 billion, compared to $2.57 billion as of January 31, 2022, while its total liabilities came in at $651.86 million, compared to $650.53 million as of January 31, 2022.
Analysts expect PATH’s EPS to decline 21.7% year-over-year to $0.06 for the year that ended January 2023. The stock has plunged 14.9% over the past six months and 54.7% over the past year to close the last trading session at $14.67.
PATH’s poor prospects are apparent in its POWR Ratings. The stock has an overall rating of D, equating to Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a D grade for Stability and Value. Within the 25-stock Software – SAAS industry, it ranks #23.
Beyond what we stated above, we also have PATH’s ratings for Quality, Growth, Sentiment, and Momentum. Get all PATH ratings here.
C3.ai, Inc. (AI)
AI is a global enterprise artificial intelligence software company. It offers the C3 AI application platform, an application development and runtime environment that allows customers to design, build, and deploy enterprise AI applications. It has numerous partnerships in the financial services and oil and gas industries.
AI’s trailing-12-month levered FCF margin of negative 37.35% compares to the 6.81% industry average. Likewise, its trailing-12-month ROCE, ROTC, and ROTA of negative 24.10%, 15.45%, and 21.68% compare to the industry averages of 4.97%, 3.19%, and 1.47%, respectively.
For the fiscal 2023 second quarter (ended October 31, 2022), AI’s gross profit decreased 1.5% year-over-year to $41.66 million, while its total operating expenses increased 16% from the year-ago value to $113.62 million. The company’s net loss widened 21.3% from the prior year’s period to $68.85 million.
In addition, the net loss per share attributable to Class A and Class B common stockholders worsened by 14.5% year-over-year to $0.63.
For the third quarter of fiscal 2023 (ended January 31), analysts expect AI’s loss per share to widen 212.4% year-over-year to $0.22. The company’s revenue for the same period is expected to decrease 7.9% year-over-year to $64.25 million.
Furthermore, the company’s loss per share for the fourth quarter (ending April 2023) is expected to worsen by 30.5% from the previous year’s period to $0.27. Its revenue for the current quarter is estimated to decline 3.4% year-over-year to $69.85 million. Shares of AI have slumped 9.2% over the past five days to close the last trading session at $22.41.
AI’s POWR Ratings are consistent with this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system.
The stock has a D grade for Stability, Quality, and Value. Within the same industry, it is ranked #24 of 25 stocks.
Click here to see the additional ratings of AI for Growth, Momentum, and Sentiment.
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PATH shares were trading at $14.77 per share on Monday morning, up $0.10 (+0.68%). Year-to-date, PATH has gained 16.21%, versus a 4.11% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns. More...
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