The market selling off on Monday gave ARK Invest CEO, chief investment officer, and founder Cathie Wood an opportunity to add to her larger positions at a discount. Growth investors often prefer to buy into momentum stocks when they're moving higher, but this doesn't necessarily mean you ignore your best ideas when they go on sale.
Zoom Video Communications (ZM -4.03%), Robinhood Markets (HOOD 1.22%), and Coinbase Global (COIN 5.30%) are three of the more compelling purchases that Wood made on Monday for her popular exchange-traded funds. Let's check out that shopping list.
Zoom Video Communications
No company had a stronger glow-up during the early days of the pandemic than Zoom. With offices and classrooms closed -- and with friends and family unable to meet in person -- Zoom became the easy way for coworkers, students, and friends to stay connected. It follows that Zoom would fall out of favor as things return to normal, but did anyone really expect the stock to be trading 52% below where it was when it peaked 11 months ago?
Zoom is still growing at a healthy clip. It saw revenue climb 54% in its latest quarter, but the shares still sold off on the report. A 54% increase was a lot less than the triple-digit year-over-year top-line surges it posted in the first five pandemic-era quarterly reports. Guidance was another dagger. Zoom has routinely boosted its guidance with every financial update, but this time the full-year hike consisted solely of the fiscal second quarter's beat.
Zoom isn't going away. Casual users may be swearing off Zoom now that folks are meeting again by office water coolers, in schools, and at family reunions and local watering holes, but the number of large customers -- where Zoom makes its money -- has more than doubled over the past year. Wood added to her Zoom position for the second time this month on Monday.
Robinhood Markets has been as disruptive as it gets when it comes to brokerage platforms. It championed the commission-free mantra that now most of the leading discounters have to follow. It thrust itself into cryptocurrency and options trading, riskier investing routes than conventional stocks and mutual funds.
Despite all of the noise, Robinhood is trading barely above the $38 price tag it went public at this summer. It's growing at a healthy rate. Revenue rose 131% in its first quarterly report as a public company. Is it problematic that less than 10% of its revenue is coming from stock trades with cryptocurrency and options at 41% and 29% of the revenue mix, respectively? Is it surprising that a platform reaching out to a young and typically inexperienced client base doesn't offer mutual funds? Throwing patrons into the deep end of crypto and options trading is a big bet, but it's also one that's working with the platform's trigger-happy users. There are now 21.3 million monthly active users with more than $100 billion in assets held at Robinhood.
You don't have to look hard to find Wood's favorite initial public offering of the class of 2021. Coinbase Global is now the fourth-largest holding across her combined ETF assets, and like Robinhood it's basically back to its initial reference price.
Coinbase got cheaper for Wood on Monday after announcing over the weekend that it would not be launching a program where customers could earn 4% by holding a Coinbase-issued stablecoin and lending it to the platform. It's the latest knock on Coinbase in what has turned out to be a topsy-turvy summer.
The good news is that Coinbase is growing at an insane speed. Revenue soared more than 1,000% in its latest quarter with profitability somehow growing even faster than that. Despite stoking valuation concerns among many investors Coinbase is actually trading for just 17 times trailing earnings. Keeping the party going will be the real trick, as analysts see revenue and earnings declining in 2022. Those projections can and will change, of course, if cryptocurrency continues to gain broader appeal and Coinbase can lead the way without sacrificing its juicy margins. For now, Coinbase appears to be Wood's favorite Wall Street rookie.