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  • Dichotomy Week: UiPath's 1st GAAP Profit, RedFin Wins from the NAR's Big Settlement

Dichotomy Week: UiPath's 1st GAAP Profit, RedFin Wins from the NAR's Big Settlement

Plus the latest from Alpha Motor and a word from Early Bird.

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I love it when the market presents investors with dichotomous situations — specifically when stocks rise or fall despite headlines that seemingly contradict the apparent resulting positive or negative catalyst.

Let’s dive into two glaring examples to that end from the past week.

🤖The market laments UiPath’s 1st GAAP Profit

Shares of UiPath (NYSE: PATH) initially tried to rally last week after the Robotic Process Automation (RPA) leader delivered a significantly better-than-expected fourth-quarter results — including its first-ever quarterly profit. But the stock ultimately turned negative as Wall Street grappled with the dichotomy between UiPath’s quarterly outperformance and its seemingly tepid full-year guidance.

As for UiPath’s headline numbers, Q4 revenue 31% year over year to $405.3 million — well above estimates for $384 million — translating to its first-ever GAAP net profit of $33.9 million, or $0.06 per share. Adjusted for non-recurring items (mostly stock-based compensation), UiPath’s (non-GAAP) net income was $128.5 million, or $0.22 per share — again above Wall Street’s consensus for $0.16 per share.

UiPath’s annual recurring revenue (ARR) also grew 22% year over year to end 2023 at $1.464 billion, and the company remained comfortably cash-flow positive, generating adjusted FCF of $146 million during the quarter. Operating leverage is obviously taking hold as UiPath scales.

Net retention rate remained healthy at 119%, and UiPath added 80 new large customers (those generating ARR of at least $100K) during the quarter, bringing its total large customer base to 2,054 clients.

So what’s the problem? Look no further than UiPath’s guidance for the current first quarter of fiscal 2025, which calls for revenue of $330 million to $335 million (below consensus estimates for $347 million). UiPath management essentially shrugged, chalking it up to typical seasonality.

Looking out to the rest of fiscal 2025, UiPath predicted for full-year revenue and ARR growth of around 19.3% and 18% from fiscal 2024, respectively — both modestly above expectations.

In the end, perhaps UiPath’s >40% rally over the past six months contributed to traders’ willingness to take some of those near-term profits off the table. But as operating leverage kicks in, cash flow expands, and UiPath’s value proposition to customers becomes ever-clearer, I’m perfectly content holding shares of this budding AI stock for the foreseeable future.

🏠How the NAR’s $418M Settlement Could Be Good for Redfin

Online real estate platform Redfin (NASDAQ: RDFN) also took a dive last week after the National Association of Realtors (NAR) struck a $418 million settlement to resolve all outstanding litigation against the organization and its members — specifically in response to a wide range of class-action lawsuits brought by home-sellers alleging the industry had conspired to boost agent commissions.

In addition to the large cash payment (to be paid over four years), the NAR agreed to eliminate the field in listing databases for the agent listing a home to offer commissions to buyers agents. That’ll make it much easier for home buyers to negotiate fees on their side.

At a glance this news seems obviously bad for any company in the home buying and selling space, in particular those that rely on broker commissions for any meaningful chunk of their revenue.

The thing is, Redfin doesn’t exactly fall into that category. Unlike Zillow, which relies largely on agents paying for exposure to be of its Premium Agent program — Redfin pays its agents with a combination of a base salary and bonuses for every home purchase or sale they close.

In fact, Redfin’s premise is built on challenging the status quo for high commissions by fighting for greater transparency in fees. So it should come as no surprise that Redfin has already issued a preliminary response to the news arguing that any proposed changes stemming from this settlement will be good for Redfin.

In any case, it’s not entirely clear yet how the new rules (set to take effect in July) will impact the industry. But I’m strongly weighing using this pullback as an opportunity to add to my position in Redfin in the meantime.

🛻Alpha Motor hits 71K preorders

If you thought you’d missed your chance to invest in an electric vehicle maker building its business the right way, think again. Previously set to end the day after tomorrow (March 22, 2024) — and fresh on the heels of exceeding 71,000 vehicle preorders last week — this morning Alpha Motor extended the end date for its RegCF offering on StartEngine to April 29th, 2024.

The budding EV company has raised just over $354K from 205 investors through that round as of this writing. Alpha Motors management has indicated this round was held largely in response to overwhelming demand from retail investors to own a piece of the business; I’d be shocked if we don’t see a larger follow-on RegA round for accredited investors in the coming months to help propel the company’s manufacturing initiatives forward.

If you missed my Premium Report on Alpha Motor last month, you can read it here.

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