UiPath (PATH) - Get UIPATH INC Report fell Monday after Summit Insights Group initiated coverage of the robotic process automation company with a sell rating and a $40 price target over concerns about competition, slowing growth and "unsustainable valuation."
Shares of the New York company were down 3.7% to $65.97 at last check.
This is the first sell rating the stock has received, according to Bloomberg, which said the price target was a Wall Street low.
Analyst Srini Nandury said in a research note that "UiPath's market ascendence is impressive, and its investments in R&D and sales are paying off."
"UiPath competes in a large but increasingly fragmented and commoditizing market," Nandury said. "While UiPath vaulted to the top of the leader board with heavy investments in sales and R&D headcount, we believe competition is intensifying for the company."
Nandury also noted that "the shares are incredibly expensive relative to the peer group names in our coverage universe."
The analyst said that UiPath is a leader in robotic process automation, "a new category of software that aims to automate routine manual business tasks and save money for businesses."
Nandury added that he expects pricing to be under pressure for all pure-play RPA vendors, "and RPA, in our opinion, has been over-hyped."
The analyst said that following conversations with industry contacts, he believes a majority of customers are still deploying less than 10 robots.
"Our checks also indicate organizational pushbacks and governmental resistance in some European countries, such as France, Italy, and Spain, continue to slow the adoption of RPA in those geographies," Nandury said.
In addition, the analyst said "many RPA implementations need the help of talented programmers who are in short supply."
"Therefore, we believe UiPath growth will slow more quickly than most investors anticipate," Nandury said.
Last month, several analysts raised their price targets for UiPath after the company reported earnings for the first time as a public company, but some expressed concern about valuation.
UiPath announced its plans to go public in March.