Last year's star moneymaker has had a challenging 2021. ARK Invest founder, CEO, and primary stock picker Cathie Wood has seen many of last year's big winners prove mortal this year, but she's not retreating.
Roku (ROKU 1.91%), Zoom Video Communications (ZM 1.46%), and DraftKings (DKNG -1.35%) are three of her fund holdings, down 54%, 58%, and 53% respectively from their all-time highs. ARK Invest added to all three positions on Tuesday. Let's see why Wood is buying into these hard-hit stocks.
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Roku
It's pretty baffling to see Roku lose more than half of its value, and it's not just Wood hearing dinner bells when the market's locked on sirens. Roku is still growing. Platform revenue soared 82% in its latest quarter. It has routinely smoked Wall Street's profit targets over the past year. Roku is the market leader in a growing niche, and it has actually widened its lead in market share over the past year. With its sizable audience, Roku is starting to spend on original programming to help attract new homes and retain old ones.
Wood added to her Roku shares on Tuesday, something that she has now done in four of the past five trading days. She sees that the stock has been disconnected from the reality of its still-growing business. Roku isn't perfect. It's facing rising costs and supply chain hiccups with its dongles. It's negotiating ad-sharing deals to keep its more popular apps around. None of this seems like it will be problematic in the long haul.
Zoom Video Communications
It seems as if Zoom Video can't do anything to get out of Mr. Market's dog house these days. Shares of the videoconferencing giant tumbled 15% on Tuesday after the company announced financial results for its fiscal third quarter. Wood was a buyer during the deluge.
The numbers look decent. Revenue rose 35%, exceeding expectations. The bottom line grew even faster, also topping analyst forecasts. Guidance landed ahead of where Wall Street pros were perched. It was a "beat and raise" performance, but the market beat it and raised hell instead.
Growth is slowing, and year-over-year revenue gains will slow to 19% for the current fiscal quarter according to Zoom's outlook. Growth will inevitably continue to decelerate as casual premium accounts downshift to free Zoom memberships, but why bet against Zoom here? It's flush with cash, and it's not going to lose its biggest customers that have embraced hybrid workplaces where Zoom's platform is necessary. This is the key to Zoom's revival in the investing community, as corporate clients follow Zoom into new growth initiatives.
DraftKings
We're a nation of sports fans, and we're willing to make it interesting when it comes to our fandom. DraftKings is a leader in wagering on fantasy sports as well as more conventional sportsbook bets.
DraftKings proved mortal earlier this month when it posted slower-than-expected revenue growth. This is still a booming market. DraftKings attracted a monthly average of 1.3 million unique paying customers in its latest quarter, as its monthly unique payers soared 31% over the past year. With DraftKings armchair gamblers spending more on wagers, DraftKings is right where it needs to be keep growing. Its partners also keep growing, seeing that DraftKings seems to put out a new press release every couple of days detailing a new win-win arrangement.
Roku, Zoom, and DraftKings are strong growth stocks. They're all trading sharply lower, but ARK Invest's Wood is still a believer.
