It's raining growth stocks, and Cathie Wood isn't one to shy away from catching them as they fall. The CEO and co-founder of ARK Invest was buying stocks on Tuesday. She was able to add to some of her largest positions at price points well below where they were last year.
What was she buying this time? Wood kicked off the holiday-abridged trading week by adding to her existing stakes in MercadoLibre (MELI 12.69%), Shopify (SHOP 1.19%), and Roku (ROKU +2.26%). Let's see what she might be seeing in these former market darlings that have fallen on hard times.
MercadoLibre
Latin America's top dog in e-commerce and fintech has emerged stronger out of the pandemic, but you wouldn't know that by looking at its stock price. It's down 67% since peaking early last year.
MercadoLibre just keeps growing. Net revenue rose 67% to $2.2 billion on a foreign-exchange-neutral basis in its latest quarter. Gross merchandise volume on its e-commerce platform only rose 32%, but that's not the real driver these days.
Mercado Pago, the company's fintech solution, is the real star. A whopping $25.3 billion in total payment volume was exchanged through the first three months of this year, up 81% over the past year. Mercado Pago's payment volume is now more than three times the volume on the e-commerce hub.
There are 81 million unique active users across MercadoLibre's widening ecosystem, up from 70 million accounts a year earlier. Things aren't perfect. Despite the blowout top-line growth, we've now experienced back-to-back reports of the company falling short of Wall Street's bottom-line targets. It's also facing global roadblocks of rising inflation, high interest rates, and consumer uneasiness.
You still can't bet against MercadoLibre's market leadership, and knowing that the stock would now have to more than triple to get back to where it was in darker times offers plenty of upside.
NASDAQ: MELI
Key Data Points
Shopify
If you think MercadoLibre shedding two-thirds of its value is bad, Shopify has had it worse. Shares of the e-commerce specialist have plummeted 81% through Tuesday's close since hitting all-time highs in November. Shopify has a 10-for-1 stock split that will go into effect next week, but investors have experienced the equivalent of a 5-for-1 split -- with no new shares issued -- over the past seven months.
Shopify isn't holding up as well as MercadoLibre. Its stock took a hit after posting rough financial results last month. Revenue decelerated to 22% year-over-year growth in its latest quarter, roughly half the rate in its weakest showing as a public company before the problematic May report. Earnings were even more disappointing, clocking in 71% below what analysts were forecasting.
The good news is that battling the near-term spike in costs should be temporary. Getting its growth back above 40%, where it has been for the last several years, won't be as easy, but with the stock so historically cheap, you can argue that slower top-line expansion is already priced into the shares.
NASDAQ: SHOP
Key Data Points
Roku
One notch lower than Shopify, Roku shares find themselves 82% below last summer's high-water mark. Roku pioneered the market for video streaming on TVs, and it continues to be a leader.
There are 61.3 million homes counting on it to fuel their binge viewing, and they're a loyal and engaged lot. The average Roku user streams nearly four hours a day on the platform, just as much as a year ago, when we were home a lot more than we are now.
Roku is free to use beyond the initial purchase of as little as $25 for a dongle to plug into the back or side of your TV. A lot of viewers don't even have to go that route, as 38% of all smart TVs shipped come with the company's operating system as the default streaming hub. Advertising is the driver for Roku, as streaming services and other consumer seekers crave the connection that it has with its growing audience. Average revenue per user -- again, not out of pocket, since we're talking about what marketers are willing to pay to reach them -- is up 34% over the past year.
It seems as if Roku is positioned well as an all-weather play here. If the economy buckles, it's true that advertisers will pare back their connected-TV spend, but more people will turn to streaming video for entertainment when money is tight.
NASDAQ: ROKU
Key Data Points
MercadoLibre, Shopify, and Roku have all seen their shares fall by at least 67% since peaking last year. Yet they continue to be strong growth stocks, delivering healthy year-over-year increases right now. Cathie Wood might be on to something here.
