UI Path Stock CRASHES | Palantir vs UI Path.

uip path was basically automation before

we had artificial intelligence now I've

been warning course members over the

last few years that artificial

intelligence is likely to replace a lot

of the functions that uith has quite

frankly done really well profiting off

of but I have to say I wasn't expecting

their stock to get hit this hard now I

know Cathy wood has exposure to uipath

so I thought today you know what let me

take a look I know she just sold a

little bit of uipath before earnings and

now after earnings it's down quite a bit

uh but it looks like your funds still

have about two you know 1.75 to 2%

exposure to it so I thought okay let's

take a look at this let's try to

understand what what there potentially

is at UI path the first thing that I

like to just understand is is there any

potential technical trend on the chart

and there's only one it's not great

right now it's basically down which is

unfortunate because you know it's wow I

mean it basically never went up since

the IPO in 2021 which which is quite

shocking uh but anyway it's now down

another 16% in after hours just under

$10 here with uh some quick financial

math on it based on current projected

earnings we're looking at about 50 cents

of uh earnings for January of 2026 so

we'll call that our 12-month forward EPS

projected growth now this is where the

problem is projected growth for this

company Wall Street is just not seeing

the projected growth it's 12% next year

11% the year after that 1 . 56% the year

after that if you add that together

that's only 8.1% growth which puts them

at about a 2.4 peg in other words fully

valued at 10 bucks you know I usually go

for about a 2 six Peg on uh on these

companies price to earnings growth right

then obviously that's just one metric

it's not a foolproof metric so you know

I'm trying to look and go okay well you

know what are some potential upshots

that we could look at here because when

the stock Falls a lot I often do look at

it I'm like H is there opportunity here

you know it's sort of like what I do

with house hack with real estate right

it's I like buying good deals and I like

buying stuff when it's distressed you

know it's down and moldy and beat up and

then I go fix it up yeah it's sort of a

old school Warren Buffett strategy

except I do it a lot with real estate

but I look for the same thing in stocks

too so I jump in over here and uh what

do we got uh this is the balance sheet I

have to say the balance sheet is great

uh I mean just at a quick glance you

know we have to go so ridiculously deep

here because look what we've got I've

got cash and cash equivs of $880

million if I add in the marketable

Securities they have they have 1.6

billion dollar they've got lots of

dollar hollas okay that's pretty good

$1.6 billion now what kind of expenses

do we have not that many because our

current liabilities are about half of

that but the vast majority of those $800

million in current liabilities are

actually deferred revenues so they only

have about $230 million in actual

current expenses longer term debt is

basically nothing I mean so say they

have about 400 million bucks in expenses

that means they have 1.2 billion of free

cash with their founder returning they

might actually end up figuring out how

to be a turnaround story now they're

competing with a lot of companies

service now palent here Microsoft you

know you have to know that uipath is

exposed to Doge I mean who is it well I

mean a lot of companies that spend money

uh or or that advertise themselves to

the government are exposed to Doge risks

but I mean a company like uipath should

be able to pull off some level of palerm

which is hey look we will actually make

you more efficient you know get rid of

the inefficiency and use our software uh

to help you become more efficient you

know uipath used to sell licenses to

basically use their software their uh

you know sort of robotic process

automation which now we just call AI or

agent AI whatever uh they were kind of

trying to be you

know automate your back office work

before AI anyway uh you know they could

if they strategically set this up use

that as a selling pitch at least my

opinion uh but what we've got uh is a

disclaimer in their 10K worth paying

attention to but in their 10K they make

it very clear to you if you haven't

noticed it yeah we currently sell and

anticipate to continue to sell to the US

federal state and local and foreign

government customers

uh obviously these are highly regulated

and come with their own uncertainties

they don't even mention Doge yet because

Doge wasn't a thing yet in the annual

report and usually in a quarterly report

you're just not going to get those sort

of disclosures you kind of have to go

back in time uh and in their earnings

call today they kind of refuse to break

out how much of their revenue comes from

the government so it's a little hard you

know that creates some uncertainties all

right how much revenue is coming from

government how much comes from the

private sector really no their license

Revenue which is where they have

phenomenal I I mean absolutely

tremendous margin is a place where

Unfortunately

they let's put it this way they had the

largest sales decline so it's something

to pay attention to I pull it up again

here I want to try to figure out what I

did with that page it's all right we'll

pull it up in just a moment here uh but

anyway so we're going to grab their

latest uh press release here and in that

last press release what you're going to

find is that they have almost pure

profit on license sales the problem with

their license sales is they're down 10%

year-over-year now their SAS sales so

basically just paying on a monthly

recurring basis or even an annual

contract basis is up 22% which is great

but that comes at a higher cost a higher

margin so or sorry a lower margin higher

expense so we could see that uh in their

last letter right here so let's jump

into uh their docks here here we go

we've got uh total Revenue therefore

averaged out to about 5% we have an

argument that they expect volatility

because of macro uncertainty which you

don't usually want to hear especially

when your estimates are already on the

Lower Side quote over the last several

weeks we have seen an increasingly

Global macroeconomic uncertainty or

level of uncertainty particularly in the

US public sector and this uncertainty is

reflected in both our fiscal first

quarter and full year outlook okay now

this is important because when they say

spec you know particularly the US public

sector I honestly think there's a chance

they're kind of getting gutted by Doge

and they're trying to innovate right

they're really trying to step up and get

into the AI agent space it's one of the

reasons they acquired Peak AI limited

which is basically a company that just

creates AI you know agent service for

the manufacturing and product optimizing

business okay fine fantastic but let's

actually look at some of the numbers

here on the quarterly figures so on a

quarterly basis again you see that the

license sector is where they have like

99% margin it's great it's sort of like

cool here's a copy of the code enjoy

there's really nothing to it on the sasp

is you know you're maintaining servers

and maintenance and updates and all that

so you have significantly worse margins

here they're still good but if you look

at this portion that's growing licenses

aren't what's growing it's actually a

potentially a risk factor now the

expenses are only somewhere around 20%

so it's not that big of a deal but I

mean that's kind of normal for SAS but

what's important in my opinion to

remember about the SAS business is when

you buy the license you own it the you

own the product the company gets the big

margin boost done when you go SAS

there's a greater chance or risk that

somebody just takes their data and says

hey I'm going to go try paler and they

end up switching products so it seems

like you know uipath is really sort of

like a company that's left behind until

they can really prove some Innovation

here now one of the issues with this is

I listened to the a part of their

earnings called I didn't listen to all

of the earning call because it was still

in progress So I listened to the portion

and the portion I listened to is they

said that they're building momentum on

generative AI but that they don't expect

that to contribute much to their 2026

revenues and then I'm thinking man I

think yall are just unfortunately

falling behind like you got to step it

up here to get get moving here uh their

estimates for 2026 missed by 3.8% could

be a doge issue their annual occurring

revenue forecast for 2026 missed by 3%

uh and uh it seems like their net

revenue retention rates are not exactly

where wall Street's hoping them to be

and there appears to be some

cautiousness on artificial intelligence

and and this is what you know the stock

market right now how uncertain it is it

wants confidence in AI you know and in

order to really instill confidence you

have to have a good product and see the

way the Market's trading right now is if

you have a great product and your

revenues are growing you can prove

growth stock starts moving up then

retail notices you and then your stock

goes up even more you know paler I mean

let's look at the valuation for paler

right now because paler has a cash War

chest as well uipath and paler both have

a cash War chest the difference is

really coming down to growth rates and

valuations remember I said this

company's growing at you know somewhere

around 8% which is on the low side for

growth paler on the other hand uh has

forecasts at least these are wall stre

expectations of much more growth in fact

it's kind of interesting when you

compare paler to uipath paler has 53

cents of earnings expected this

company's 51 cents it's like they expect

the same amount of earnings except

uipath is trading for $10 and paler is

trading for you know $80 is right now

might be $85 I mean this this is so

volatile but the growth trajectory for

paler right now is 25% then 28% then 41%

then 29% % you know those are four years

right there divide that by four that's

31% growth divided by 8 you know we're

talking about four times the growth at

paler uh so paler that's the growth

story and that's what I'm saying like

once you prove a little bit of growth

then retail sees you and goes I got have

it and it's fine you know this is I'm

not trying to bag on on paler I'm just

saying like that's what moves stocks is

growth uh evaluation doesn't so much

matter you have to show growth missing

growth is bad you you really got to beat

here so maybe they can pull it off and

and maybe hopefully they don't have too

many government Cuts but they've really

got to somehow get the commercial

contracts going because I don't think

they can keep relying on the federal

government so a little bit of a risk

that they're getting doed maybe they can

figure out how to really advertise one

of their new products but their

advertising s like their their sales and

marketing numbers are actually down if I

look at paler trading with what do we

got here uh 31 times growth 85 bucks

divided by 51 they're trading for 166

times * 31 you know they're trading for

a 5.3 Peg they're trading for twice the

valuation that UI path is already

adjusted for growth right already

adjusted for growth they're trading for

five times uip path not adjusted for

growth they're trading for you know two

times right or sorry

um am I getting this right hold on

adjusted for growth let's let's let me

clarify this okay adjusted for growth

okay already on a PEG ratio basis paler

is trading for two times the valuation

of

uipath on a not adjusted for growth

basis uh uip path is trading with the

same sort of Revenue I mean you could

honestly just look at the share price

here it's trading for about eight times

uh as much as

uipath so uh that's why I like looking

look same EPS right uh different share

prices $10 85 bucks one's trading for 8

and a half times as much but it's got so

much more growth at paler and that's why

we say paler is trading for Just Two

Times the valuation of uith on that

growth adjusted basis so there bottom

line paler is twice as expensive now

it's probably twice as expensive because

it has the growth so it's sort of like a

chicken or egg problem there uh and

that's where I think if paler gets back

to like 40 bucks you're actually buying

the growth of paler at a UI path

valuation somewhat interesting to look

at but another thing to watch for is

what's going on with sales and marketing

so first if we look at them and then

we'll compare to palent here if we look

at their sales and marketing you could

see right here sales and marketing

declining uh and this is in the

year-over-year for the quarter but not

for the year basis right so on the

12-month basis their marketing is up 713

12- month basis they're up 3.5%

on a year-over-year on the quarter basis

they're down 8% so why all of a sudden

are we looking at an 8% haircut in

marketing is there sort of a lack of

potential confidence I don't know if you

go over to paler for example paler is

still you know at least for Q4 showing

commercial and government revenue growth

of course the government revenue growth

could get hit especially with the 8%

Department of Defense Cuts year over

year over year it's one of the reasons

actually paler started sliding a little

bit from their $120 value ation when

they were trading for like a npeg uh but

if we go to some of the financials here

look at paler sales and marketing see

they get it that in order for your stock

to Skyrocket you need to plow money into

marketing because you want to show

growth it like these companies basically

it's growth at all costs like people

don't care if you make money look paler

at you know three cents in the quarter

what they want is growth they want this

number up and look at that this is

what's sexy to Wall Street okay you get

in here and it's like oh yeah give me

652 versus

4997 oh my gosh my calculator says 31%

growth and we're going to project that

out for the next four years oh it's so

nice that's what kind of gets the stock

going and they know that so usually when

sales and marketing goes down it's a

sign that maybe they don't have cohesion

on their product on their messaging yet

Palante here when your marketing goes

like let me let me rephrase that if you

have a good product today okay let's say

you have these two coffee mugs all right

this one says Tesla we know how to Brand

it this one we don't know how to Brand

it yet see it's a clean slate CU we

don't really know what our product is

yet yeah we help you automate your back

office okay what does that mean uh well

we have all this old stuff figure it

figure out what your product is and and

then start spending money on marketing

paler is like yo we got to save you lots

of money we got a brand all right sign

me up so like obviously both of them are

designed designed to try to save your

money but I don't think path has their

marketing figured out yet and I think

that's why or their message and I think

that's why their advertising s like

their their sales and marketing spend is

going down on a SAS business sales and

marketing spend going down is usually

not good you know that's obviously

different very very very different from

like an asset-based business like for

example you know a real estate company

you shouldn't have to spend a lot of

money on sales and marketing like your

sales and marketing spend should be zero

basically because you take money and you

deploy it into real estate like what are

you marketing for uh so it should be

very very low it's pot You could argue

you know brand like lenar a home builder

maybe you're advertising homes for for

for lease or build or whatever fine

there's always going to be a little bit

but compared to a SAS business should be

should be nominal SAS businesses on the

other hand I mean look at paler you know

what what do we got here paler their

year-over-year

growth uh for the full 12 months on

marketing is 19% and their sales and

marketing when I just compare the

quarter year-over-year is 46% so they're

actually accelerating their marketing

spend going into the end of the year now

maybe that was strategic and they're

like hey man if the Market's going to

tank in 2025 let's get the real pump in

in in the December quarter which they

got a fantastic pump you know great job

I mean they make both of these companies

make a lot of cash flow they're SAS

businesses the question just comes down

to what's a fair valuation for these

companies paler selling rich

but it has the growth and it has the

retail

momentum uip paath has no

momentum I mean how much how much how

many UI path shares sell in a day 50

million shares at $10 okay who cares

that's like 300 to $500

million paler how many shares traded uh

oh this is in a

week yeah yeah this is in a week okay

that's fine that'll give us something

more consistent palente here I got 570

million shares at

$80 that's a 47 billion

dollars okay that means that's such a

big number I'm like joking that's like

90x the trading volume right for every

$1 that gets traded in uipath $90 trade

at paler cuz like retail's nuts for

paler everybody wants paler uh and and

paler knows this and that's why they're

spending more on advertising and so it's

sort of this perpetuating cycle now if

paler starts cutting sales and

advertising or the stock Falls and and

they you know they miss some of their

growth they'll fall even more and more

rapidly I personally think a fair

valuation at these growth levels for

paler probably closer to this 43 support

line over here uh so like this growth

here totally reasonable this right here

was momentum driven and you can almost

see it on like just by looking at the

lines usually when we have a slope

that's this steep it's

momentum this could be fundamental right

this is your more sustained solid growth

uh it's sort of like with Tesla right so

that's it's a momentum chart and it does

tend to reverse over time whereas like

you zoom out on on the NASDAQ for

example you know you zoom out on the

NASDAQ on the month it looks like a

giant meme stock since the financial

crisis uh but this looks a a little bit

more normal I suppose you know because

if we actually draw out oh look we have

my long-term that's part of my Nike swo

right here this uh this yellow line

right here oh wow look at this let's

drag that Nike Swoosh out just noticing

that oh that put you about the mid fours

to go revisit the the Nike Swoosh you

know because there has been a little bit

of extra Trump Euphoria built in on over

here uh but that's okay so anyway my

thoughts on uh some notes for for UI

path I just saw they were down 16% I'm

like hm you know is it a buying

opportunity uh bottom

line I I a they're probably going to get

beat up because of government contracts

for a while longer but I really need to

see some like stickiness on a cohesive

marketing message around a product that

is great easy to understand easy to

implement and then some traction I don't

know that we have that right now anyway

thanks for watching we'll see you in the

next one goodbye why not advertise these

these things that you told us here I

feel like nobody else knows about this

we'll we'll try a little advertising and

see how it goes congratulations man you

have done so much people love you people

look up to you Kevin paffrath there

financial analyst and YouTuber meet

Kevin always great to get your take