Cathy Wood owns 18% of her money in the Three Growth Stocks

Cathy Wood owns 18% of her money in the Three Growth Stocks


Kathy Wood is president of Ark Investment Management, a company known for placing big, long-term bets on some of the most innovative technology companies. It operates eight exchange-traded funds (ETFs) focused on different areas of the technology sector from robotics to space exploration, and has a total of 34 different stocks.

A panel of Fool.com shareholders has selected three of those stocks that really stand out, and together, these stocks represent 18.2% of Ark’s total ownership. Here’s Why Investors Want to Follow Cathy Wood’s Lead with Ownership Tesla (TSLA 3.60%)And the Rocco (ROKU 3.29%)And the Zoom video communication (ZM 2.98%).

The future of green cars and green energy

Anthony DiPizzo (Tesla): Cathy Wood owns several big companies, but perhaps none of them have as long-term potential as Tesla. The company is already the global leader in the electric vehicle industry, and while this business is likely to drive the company’s revenue for the foreseeable future, Tesla is also quietly building a presence in other high-impact sectors.

By 2024, the company expects to launch its own robotic robotic devices, which will run on fully self-driving technology. This could be the future of the mobility industry, and one estimate says the opportunity could be worth more than $2.1 trillion annually by 2030. Wood’s Ark Investment is incredibly excited about this part of Tesla’s business, and expects to make up 60% of the company’s value by 2026.

but that is not all. Tesla also has a growing residential solar and battery storage segment that has already done great things. Since 2012, the company has deployed enough solar power to account for all the energy its cars and factories have consumed during that time combined.

The company is also currently working to increase annual production capacity of two million electric vehicles thanks to its new giant plants in Austin and Berlin. These facilities are expected to expand rapidly, and analysts expect Tesla to generate $119 billion in revenue in 2023, the first time the scale has entered triple digits.

But CEO Elon Musk is watching the long run, which could include 10 to 12 additional Giga plants by the end of the decade, capable of making 20 million cars a year. No wonder Wood and her company are so optimistic about Tesla — in fact, Ark believes the stock could rise 437% to $1,533 a share between now and 2026.

This bargaining basket stock still dominates broadcasting

Jimmy Loco (Rocco): As of September 7, Roku is one of the largest holdings across all of Ark Invest’s ETFs. Wood has been actively adding to her inventory over the past few months, too. Since July 29, Ark Invest has bought more than 470,000 shares of Roku stock, likely because they are trading at about three times sales — near their lowest valuation since it went public.

However, the company is cheap for a reason. Roku struggled in the second quarter, posting just 18% year-over-year revenue growth. why? Businesses cut back on spending as budgets tighten, and advertising is an easy place to do that. Even more frustrating is that the company sees continued headwinds ahead for the rest of the year: In the second quarter, the company gave guidance for the third quarter indicating revenue growth of just 3% year-over-year.

However, Cathy Wood and Arch Invest are looking for long-term opportunities. On that front, Roku still looks sexy. Broadcasting continues to gain traction with American consumers aged 18-49 spending 50% of their television airtime last quarter, up from 40% in 2020. While consumers spend half their time broadcasting, only 22% of budgets TV ads go towards he-she. Given that Roku is the largest streaming platform by airtime hours in the US, Canada, and Mexico, the company has the potential to take advantage of this opportunity as advertisers eventually shift more of their budgets toward streaming.

The most notable risk to Roku is that it loses its leadership position and thus its position as the preferred platform for advertisers to purchase ad inventory. The company faces stiff competition, but Roku sees no signs of losing its leadership position. The company has more than 63 million active accounts, which jumped 14% year over year, and the number of hours streamed on its platform has steadily increased to 20.7 billion last quarter.

While the short run seems harsh for this flowing stock, the long term tailwind is still in full swing. That’s probably why she’s adding Wood to her position, and she might want to consider following suit.

A beloved pandemic still has a lot to offer

Trevor Genwin (Zoom Video Communications): Zoom specializes in cloud communications. The company is best known for Zoom Meetings – the best video conferencing app on the market – but its portfolio also includes other enterprise pillars: a cloud phone system (Zoom Phone), a multi-channel customer support solution (Zoom Contact Center), and a corporate conferencing system (Zoom Rooms). These products allow businesses to replace costly on-site hardware with cloud software and standardize communications spending on a single platform.

Accordingly, Zoom Meetings has earned a reputation for simplicity and reliability as its popularity has skyrocketed during the pandemic, and its leadership position in the video conferencing market has further cemented Zoom’s brand authority. This competitive advantage is the foundation of a robust growth strategy to land and expand, and that strategy is beginning to pay off.

During the recent earnings call, management referred to the “early traction of Zoom Contact Center and Zoom IQ for Sales,” a new artificial intelligence (AI) program that analyzes Zoom meetings to bring out insights that boost sales productivity. But Zoom Phone stole the show as it reached four million seats in August 2022, up from just one million in January 2021.

Of course, many investors have been disappointed with Zoom’s financial results lately. Revenue rose just 8% to $1.1 billion in the second quarter of fiscal year 2023 (ended July 31), and earnings fell 86% to $0.15 per share. But unfavorable exchange rates and the war in Ukraine were 200 basis points headwinds in the lead, according to the administration. Moreover, Zoom is currently a victim of its own success. Many small businesses have embraced Zoom meetings through an online self-service portal during the pandemic, but these customers tend to be less consistent than enterprise customers (for example, larger companies with direct sales staff or Zoom sales partners).

So management doubled down on its enterprise sales strategy, and initial results were encouraging. The number of enterprise customers rose 18% in the second quarter, and the average enterprise customer spent 20% more than it did a year ago. This momentum should continue as more companies adopt telecommuting or hybrid work, but Zoom has other catalysts working in its favor as well.

The company estimates its total addressable market (TAM) at $91 billion by 2025, the vast majority of that number coming from Zoom Meetings, Zoom Phone, and Zoom Contact Center. At the moment, no product except Zoom Meetings accounts for 10% or more of revenue, although the Zoom Phone comes close. This means the company has plenty of room to expand with existing customers, and its comprehensive cloud platform means it’s also well positioned to attract new customers.

Finally, Zoom IQ for sales is a particularly exciting development. It represents the company’s expansion of AI services, and could significantly enhance the value of Zoom meetings, further cementing its leadership. On a larger scale, this kind of innovation paves the way for additional AI services in the future – for example, Zoom IQ for customer service as a solution adjacent to a Zoom call center.

At the moment, the shares are trading at 5.9 times sales – their lowest valuation since Zoom went public. Given the company’s ability to accelerate sales growth, this assessment sounds like a bargain. This is why this growth stock is worth buying now.





Source link

Leave a Comment