August 30, 2022, UiPath Inc. (NYSE:PATH) and Snowflake Inc. (NYSE:SNOW)
With inflation fears still a major concern for the market, consider these “deflation enablers” the best stocks to buy now.
Inflation remains an evident concern for the market. Fed Chair Jay Powell closed out last week with glum words at Jackson Hole, indicating that the Fed must keep fighting inflation “until the job is done,” and that there could be another “unusually large increase” in interest rates. The market continued Friday’s (August 26, 2022) tank-a-thon, with the Dow falling 184 points (-0.57%), the S&P 500 dropping -0.67%, and the Nasdaq dipping over -1.00% on Monday (August 29, 2022). There’s ample opportunity in this environment for “deflation enablers” like UiPath Inc. (NYSE:PATH) and Snowflake Inc. (NYSE:SNOW). Although both stocks have seen ups and downs, with PATH especially struggling to break out, they sit as the best stocks to buy now because they help companies cut costs while maintaining a semblance of growth and improved performance.
Companies that enable automation like UiPath and Snowflake should trade at a premium right now. However, they’re not, and investors should start rushing in.
Both UiPath and Snowflake can be considered more speculative. But both have impressive business models and high-value clients. These stocks are also experiencing notable top line growth, with analysts noticing. This month, Snowflake received a $274.00 price target from Morgan Stanley, representing a 46.97% upside from Monday’s (August 29, 2022) close. UiPath, although treading water for much of the year, has an average analyst upside of 78+%.
While these companies do not offer much from a fundamental perspective, their potential as disruptors and innovators amid an uncertain economy makes them the best stocks to buy now.
UiPath Inc. (NYSE:PATH)
As it spearheads a potential $26.0 billion global RPA and hyper-automation market, this deflation enabler has a whopping 78+% upside.
UiPath creates a unique, industry-leading value proposition with its end-to-end automation platform, enabling robotic process automation (RPA) solutions for businesses.
If you haven’t heard of RPA, get familiar because the global RPA and hyper-automation market could balloon from $9.2 billion in 2022 to $26.0 billion by 2027, at a 23.1% CAGR. UiPath is leading this market forward with cutting-edge software that saves time and money.
UiPath’s platform combines next-gen AI with desktop recording, back-end mining of both human activity and system logs, and an intuitive visualization tool.
With UiPath, clients in banking, financial services, healthcare, and government can automate round-the-clock procedures that would need slower and more expensive people to handle the most complicated tasks.
It’s been a rough year for PATH, and the stock has yet to sustain a breakout. Although it still sits -63.27% below its 2022 highs, its revenue growth and sticky business model make it one of the best stocks to buy now. There’s a real chance it breaks out eventually, especially if PATH’s 78+% average analyst upside holds up.
Soaring Revenue and a Methodical March to Profitability
UiPath will report its Q2 earnings next week (September 6, 2022), but its Q1 earnings from earlier this summer (June 1, 2022) showed outstanding revenue growth and a methodical march to profitability.
Notably, its revenue growth caught the attention of investors as it came in at $245.07 million, beat consensus analyst estimates by roughly $20 million, and surged 31.6% year-over-year.
Earnings in the coming year should approach positive territory, especially if UiPath’s net income increases 98.5% and averages 196.6% growth over the next five fiscal years as Finbox projects.
A Sticky Business With a Solid Balance Sheet and Industry-Leading Gross Margin
PATH isn’t one of the best stocks to buy now because its fundamentals are perfect. Many of its margins, in fact, leave a lot to be desired for value based on fundamental investors.
Why it’s one of the best stocks to buy now because it trades -63+% below its highs and has a sticky business model with a solid balance sheet that holds more cash than debt.
There’s a lot to be said about a Company with over 10,000 global clients, an annualized run rate (ARR) of $1 billion, and a dollar base net retention rate of 138%.
Its 83.3% gross margin is also outstanding, ahead of better-known large caps like Microsoft and Oracle and one of the very best in the industry.
Its Average 78+% Upside is Too Tantalizing to Ignore
There hasn’t been much crazy analyst activity for PATH over the last few weeks. However, its average upside is too astounding to ignore.
According to Tipranks, 12 Wall Street analysts offered 12-month price targets for UiPath in the last 3 months. Calling its high price target of $45.00 attractive is an understatement. Truist and Credit Suisse gave the stock this figure in early June, and today, it represents a 172.40% upside from August 29, 2022’s $16.52 close.
However, even if its $18.50 price target represents a worst-case scenario, PATH’s average price target of $29.54 indicates a 78.69% upside. An average upside like that screams that UiPath is one of the best stocks to buy now.
PATH’s year-to-date low and high are $13.66 and $44.98, respectively.
Snowflake Inc. (NYSE:SNOW)
Morgan Stanley sees an almost 47% upside for this cloud giant and elite deflation enabler.
Snowflake is an excellent deflation enabler because it leverages cloud-based data warehousing and AI with various platforms.
Snowflake customers can easily automate and consolidate their data into something shareable and easily accessible. They can also analyze their data to derive business intelligence and insights to create monetizable data-driven applications and solutions.
While the Snowflake stock still trades at over half its all-time high of $429.00, fortunes may be changing. It had a bad day on Monday (August 29, 2022), but it’s still up over 67% since trading as low as $110.27 on June 21, 2022.
Although the economic headwinds remain, Snowflake shares soared over 18% following its latest earnings report (August 24, 2022), and clearly, analysts are on the bandwagon too. Snowflake received a ton of bullish analyst coverage this month, including a $274.00 price target from Morgan Stanley, representing an almost 47% upside.
Snowflake’s Latest Earnings Point To Eye-Popping Growth
Snowflake’s not yet profitable, but its Q2 earnings, announced on August 24, 2022, reported colossal year-over-year growth in revenue and clients.
First, revenue came in at $497.25 million, beat analyst estimates by roughly $30 million, and marked an 87% year-over-year explosion. Further breaking down its revenue growth shows outstanding year-over-year growth in various business segments and noteworthy customer trends.
- Product revenue of $466.3 million in the second quarter, representing 83% year-over-year growth
- Remaining performance obligations of $2.7 billion, representing 78% year-over-year growth
- 6,808 total customers, an 8% quarter-over-quarter increase
- 246 customers with trailing 12-month product revenue greater than $1 million
- Net revenue retention rate of 171%
If these figures weren’t enough reason for Snowflake to be one of the best stocks to buy now, the Company also raised its product revenue guidance and full-year revenue guidance. Snowflake now expects 74.5% revenue growth to between $500 million to $505 million, a 75% non-GAAP gross profit margin, and full-year revenue between $1.91 billion-$1.92 billion.
Snowflake’s net income could also surge 108.1% and average 118.4% growth over the next five fiscal years, according to Finbox.
Improving Financials and Bullish Activity Have SNOW On the Path Towards Net Profitability
Snowflake holds more cash than debt on its balance sheet and significantly improved its finances last quarter. Cash flow from operating activities turned positive, and the Company chugged ever closer toward net profitability. Considering Snowflake’s run rate, the Company could be reporting positive earnings by the time 2024 rolls around.
Its 64.8% gross margin is undoubtedly a great start.
If you peel the layers and uncover what’s going on underneath the stock, investor activity indicates that many see profitability in SNOW’s future as well. Only 4.49% of Snowflake’s float has been sold short, and short interest recently decreased by 3.95%, indicating an improving investor sentiment.
Additionally, the stunning ratio of institutional buys vs. sells tells a very telling story. Institutions currently hold 76.67% of SNOW shares, and in Q2, $1.83 billion worth of shares were bought compared to just $226 million sold.
It’s evident we’re not the only ones calling SNOW one of the best stocks to buy now.
Several Technical Indicators Say It’s a Good Time to Buy
Stock website Barchart doesn’t unanimously call SNOW one of the best stocks to buy now, but according to its data, technical indicators are beginning to say that the stock is buyable. Especially relative to the previous week and the previous month.
Barchart specifies Snowflake’s following indicators as technical BUY signals.
- 20 Day Moving Average
- 20 – 50 Day MACD Oscillator
- 20 – 100 Day MACD Oscillator
- 50 Day Moving Average
- 100 Day Moving Average
- 150 Day Moving Average
Morgan Stanley Sees SNOW Running Almost 47%
If you look at overall analyst activity over the last 3 months, the upside appears limited. Perhaps that’s because many of these analysts didn’t consider Snowflake’s latest earnings report.
Tipranks notes that 31 Wall Street analysts offered 12-month price targets for SNOW in the last 3 months. Currently, the Snowflake stock has a street-high price target of $274.00 compared to a low of $125.00 and an average of $204.37. The average price target represents a pedestrian 9.62% upside from its August 29, 2022, closing price of $186.43.
However, the rush of analysts boosting their SNOW price targets throughout August explains why it’s one of the best stocks to buy now.
Morgan Stanley, notably, gave it its street-high $274.00 target on August 15, 2022, representing a 46.97% upside.
Over the last few weeks, others gave SNOW similarly bullish price targets considerably above its average.
- Oppenheimer- $230.00
- Mizuho- $225.00
- Piper Sandler- $220.00
- JMP Securities, Robert W. Baird- $215.00
- JPMorgan- $210.00
Safe to say that the $204.37 average is a bit overly bearish.
SNOW’s year-to-date low and high are $110.27 and $354.92, respectively.