UiPath - 'long term questions around defensibility remain,' says Morgan Stanley

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By Sam Boughedda

Morgan Stanley analysts told investors in a note Friday that UiPath Inc's (NYSE:PATH) AI Summit provided an early look at the strategy and productization of AI capabilities within the broader automation platform.

The analysts, who have an Equal-Weight rating and $16 price target on the stock, said while the event well showcased the platform's breadth, "long-term questions around defensibility remain."

"The clear message from management throughout the event was recent advances in AI technology should be viewed as largely complementary to existing automation use cases, as the enterprise customer still demands a secure and reliable end-to-end platform to deliver automation functionality," the analysts explained.

They added that UiPath is pursuing three approaches, including built-in AI – integrating new AI technology, bring your own AI — allowing customers to bring, build, and customize their own AI models, and integrate external AI — offering prebuilt connectors for AI functionality.

"We come away more encouraged given UiPath appears front-footed in integrating AI capabilities into its existing offering, in addition to the fact the broader Generative AI momentum likely enables incremental top of the funnel activity and enables C-suite conversations as organizations are looking to modernize," added the analysts. "On balance, we view today's announcement as unlikely to quell investor fears about the long-term defensibility of pure-play automation vendors given the high pace of innovation that consolidators (such as Microsoft) have exhibited recently."

They concluded that Morgan Stanley sees the potential near-term benefits of elevated AI/RPA momentum as primarily offset by the long-term concerns about broader disruption.