UiPath dropped 16% post-earnings.
I bought the stock on the previous breakout, a few weeks ago. The logic was simple; SaaS were going to become a big deal once AI-enhanced and we started to see the market treat them as such with the IGV breaking out early May. Many leaders broke out and shot up, becoming too expensive before any fundamental confirmations. But UiPath was just starting its move, a bit delayed.
My first position got stopped out rapidly on Claude news. I took the trade a second time as the setup got even better. The position is now up ~19% after this 16% drop. An extremely good performance in a month.
We now need to review the quarter as it has some impacts on the thesis, and what to do with that position.
Saaspocalypse Is Cancelled
AI demand isn’t a question anymore. We know it’s here, we know it’s growing, we know it’s massive. We also know it isn’t showing up everywhere at the same speed.
We have clear winners - Palantir and cybersecurity, who keep winning. Their numbers continue to accelerate. But many SaaS are still either in the earlier innings with some numbers that start to ramp up - like Zeta. Or showing healthy core business which invalidated the bear case, but no AI acceleration just yet – ServiceNow as an example.
Overall, we know where the SaaS market is going, in time. (up).
So when UiPath falls 16%, it isn’t because results were bad but because in a market, everyone looks for performance and performance comes with acceleration. This quarter didn’t show acceleration - while others did, so the market let it go.
The question was never “can UiPath do well in an AI world?” We know the answer: yes. The question is: can UiPath do above average? Because that’s what we need to have a performing stock.
This quarter, the market voted no.
But the market votes wrong all the time. Many stocks deliver above average returns without above average results, because valuation and momentum are also part of the game. Not just fundamentals.
Let’s look at the data itself, the potential of both the company and the stock, and what I’m doing with my position.
