Some of the market's hottest growth stocks have been correcting sharply since mid-February, and Wednesday was another rough day for some former highfliers. As investors kept rotating out of disruptive tech stocks, one notable growth investor was catching the falling shares.
Cathie Wood was buying the dip on Wednesday, adding to several of her positions across ARK Invest's high-octane exchange-traded funds (ETFs). Peloton Interactive (PTON 2.62%), Skillz (SKLZ 2.64%), and Teladoc Health (TDOC 3.31%) were among her purchases despite surrendering as much as 15% of their value on Wednesday. Let's see why she may be on to something with all three stocks.
Image source: Peloton.
Peloton
The biggest loser on her Wednesday shopping list was Peloton. The home fitness specialist plunged 15% on the day after issuing a recall on its treadmills. Dozens of reported accidents, including one that caused the death of a 6-year-old child, led to a safety investigation.
We can't make light of the recall. People pay a premium for Peloton as an aspirational brand, and safety is assumed when someone pays more than $4,000 for a treadmill. There will be a negative impact here, but it's also worth pointing out that stationary bikes are Peloton's top seller.
Peloton reports fiscal third-quarter results shortly after today's market close, so volatility should continue through at least the end of this week. We'll see if this winds up being one buying rep too many for Wood.
Skillz
Rad typo aside, Skillz suffered a 9% drop on Wednesday. Wood still found it fit to add to her Skillz position in two of ARK's ETFs, purchasing more than 3.1 million shares on Wednesday after buying nearly as much the day before. Skillz operates an online gaming platform that helps developers monetize their apps through contests and tournaments.
Skillz posted fresh financial results today. Revenue rose by a better-than-expected 92% in its latest quarter. The company also boosted its guidance for all of 2021. It did report more red ink than analysts were modeling for, but Skillz isn't being valued for its bottom-line results at this point in its growth cycle. It has grown its base of paying monthly active users by 81% over the past year.
Teladoc
Finally, we have Wood adding more Teladoc to three of her four high-growth ETFs. Teladoc shares only dipped 1% on Wednesday, but they've been reeling since posting quarterly results last week. The telehealth leader has now declined in six of the last seven trading days, shedding more than 17% of its value in the process.
Teladoc offers a win-win-win proposition for patients, companies, and insurers. Patients win because they can see a doctor, nutritionist, or therapist from the comfort of home and often within a matter of minutes. Companies benefit because it means employees don't have to take days off to go see a medical pro in person. Insurers make out because a virtual consultation is a lot less expensive than an office visit.
Teladoc completed 3.2 million visits during the first three months of this year, a 56% year-over-year increase. There are now 51.5 million U.S. paid memberships, but many of those accounts either aren't aware that Teladoc is offered as part of their plans or they're simply skeptical of the telehealth experience. The skepticism is actually a good thing. It shows how long the runway is for Teladoc.
The market for telemedicine is starting to heat up. Even the world's largest online retailer expects to go national with its offering this summer. Teladoc should still continue to grow even if its piece of the growing pie contracts in the future.
Teladoc and Peloton have shed roughly half of their peak value in recent months; Skillz has taken an even bigger hit. Wood sees potential in all three out-of-favor growth stocks. It would be an opportunistic time to follow her into some of these roughed-up investments.
