Shares of UiPath dropped Monday after a downgrade that warned customer pushback and confusion about the software's company artificial-intelligence pricing could weigh on growth.
In midmorning trading, the stock was off 1.6% to $12.26. Shares are down 37% this month, on pace for their worst month since March 2022 when they fell 38%, according to Dow Jones Market Data.
DA Davidson's Lucky Schreiner lowered his rating to Underperform from Neutral and his price target to $10 from $16.
Schreiner's reasoning: Customers and enterprise partners have said they think UiPath's pricing for its artificial-intelligence features is too high or confusing, following the company's Investor Day last Tuesday.
The analyst outlined pricing as a red flag after talking with six industry partners and five enterprise customers. Buyers have resisted the higher costs of adopting Maestro, UiPath's new orchestration platform.
Customers, according to Schreiner, can often achieve similar results more affordably by using AI agents directly from other model providers-OpenAI, Anthropic, or Microsoft, for example-instead of paying UiPath to manage them.
UiPath didn't respond to Barron's for a request to comment.
The company relies on its AI products, adding about 60% of net new annual recurring revenue in the fiscal year's first half, he said. With the customer pushback, he doubts UiPath can easily raise prices or expand spending from existing customers.
At UiPath's Investor Day, Schreiner said management showed product updates but didn't offer any new growth forecasts. It did repeat its long-term operating margin target of more than 30%.
Because of more software competition, Schreiner is questioning whether the company will beat expectations for its fourth-quarter earnings ending Jan. 31.
UiPath's projection implies $73 million in new net annual recurring revenue, a significant 28% jump from last year's fourth quarter.
Looking ahead, he expects revenue growth to slow into the next fiscal year as it feels the squeeze from competition.