2 Cheap Growth Stocks to Buy Before They Soar 175% and 495%, According to Certain Wall Street Analysts


The S&P 500 has advanced 15% year to date and 42% since the beginning of 2023. Those gains have made it difficult to find bargains in the stock market, but certain Wall Street analysts see plenty of upside in UiPath (NYSE: PATH) and Block (NYSE: SQ).

  • Keith Weiss at Morgan Stanley has outlined a bull-case scenario that puts UiPath at $35 per share by May 2025. That forecast implies 175% upside from its current price of $12.69 per share.

  • Maximilian Friedrich at Ark Invest published a valuation model nearly four years ago that puts Block at $375 per share by December 2025. That forecast implies 495% upside from its current price of $63 per share.

Spoiler alert: Both price targets appear overly ambitious, but UiPath and Block still warrant consideration. Here’s what investors should know.

1. UiPath

UiPath is the market leader in robotic process automation (RPA). Its platform helps businesses discover opportunities for automation with process mining and task mining tools. It also helps businesses build and manage software robots to automate those processes and tasks. Additionally, UiPath extends its RPA functionality with artificial intelligence (AI) capabilities like computer vision, natural language processing, and machine learning.

For example, UiPath’s Document Understanding product can extract, interpret, and take action on information from documents. Its Communication Mining product brings the same features to conversational channels like email and chat, which lets businesses automate certain customer interactions. Forrester Research recently recognized UiPath as a leader in document mining and analytics, and the IDC recognized its leadership in intelligent document processing software.

UiPath reported reasonably good financial results in the first quarter of fiscal 2025 (ended April 30). Revenue increased 16% to $335 million and non-GAAP (adjusted) net income increased 18% to $0.13 per diluted share. But management provided discouraging context that that caused the stock to tumble 35% following the report.

Specifically, management said deals slowed toward the end of the quarter due to macroeconomic challenges and inconsistent sales execution. Those headwinds are evident in guidance, which calls for revenue growth of just 5% in the second quarter. Founder Daniel Dines has reassumed the role of CEO to steer the company through the challenging period ahead.

On the bright side, UiPath is the market leader in RPA software, a market projected to grow at 40% annually through 2030. The company is also leaning into demand for generative AI with Autopilot, a conversational assistant that automates various tasks. For instance, Autopilot can streamline the development and testing of automations. Some Autopilot features became generally available in June 2024.

Wall Street expects the company to grow sales at 14% annually through fiscal 2028 (ends January 2028). That consensus estimate makes the current valuation of 5.3 times sales look quite reasonable. However, shareholders probably won’t see triple-digit returns in the next year.

Morgan Stanley’s bull-case price target is contingent upon a discounted cash flow model that assumes revenue will grow at 18% annually over the next decade. That is unlikely at this point. However, Morgan Stanley’s base-case target of $15 per share still implies that the stock is cheap right now.

2. Block

Block is a fintech company that breaks its business into the Square and Cash App ecosystems. Square simplifies commerce for merchants with a cohesive set of hardware, software, and banking services. That integrated product strategy differentiates Block from traditional merchant services providers, which generally equip small businesses with disjointed payment processing solutions. Block aims to grow the Square ecosystem by engaging larger sellers and expanding internationally.

Similarly, Cash App simplifies consumer finance by integrating a broad range of services on a single platform, including the ability to save, spend, borrow, and invest money. Despite competition from PayPal and Venmo, that value proposition is resonating with the market. Cash App was the ninth-most downloaded mobile application in the U.S. last year, and the most downloaded digital wallet. Block is particularly focused on driving direct deposit adoption and boosting cash inflows.

Block reported solid financial results in the first quarter of 2024, beating expectations on the top and bottom lines. Square gross profit rose 19% to $820 million and Cash App gross profit rose 25% to $1.2 billion, such that total gross profit increased 22% to $2 billion. Meanwhile, non-GAAP net income jumped 98% to $0.85 per diluted share.

Block made progress expanding the Square ecosystem upmarket and internationally during the quarter. Mid-market sellers, defined as generating $500,000 in annualized gross payment volume (GPV), accounted for 39% of Square GPV, up from 38% in the prior year. International sellers accounted for 13% of Square gross profit, up from 11% in the prior year.

Block also made progress in driving Cash App inflows. Monthly transacting users increased 6% to 57 million and inflows per monthly transacting user increased 11% to $1,255. Management also noted strong momentum with a variety of products, including Cash App Card, Cash App Borrow, BNPL (buy now, pay later), and Bitcoin.

In summary, Block has a reasonably strong economic moat in its ability to simplify commerce and consumer finance, and the company is making progress on its strategic growth initiatives. Block has almost no chance of returning 495% by 2025, but patient investors should still consider buying a small position. Wall Street expects adjusted earnings per share to grow at 40% annually through 2026. That makes its current valuation of 28 times adjusted earnings look quite reasonable.

Should you invest $1,000 in UiPath right now?

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Trevor Jennewine has positions in Block, PayPal, and UiPath. The Motley Fool has positions in and recommends Bitcoin, Block, PayPal, and UiPath. The Motley Fool recommends the following options: short June 2024 $67.50 calls on PayPal. The Motley Fool has a disclosure policy.

2 Cheap Growth Stocks to Buy Before They Soar 175% and 495%, According to Certain Wall Street Analysts was originally published by The Motley Fool

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