They say that misery loves company, and one can also say that Cathie Wood loves misery. The growth investor that became a rock star after a market-thumping run in 2020 as the co-founder and CEO of the Ark Invest exchange-traded funds (ETFs) has seen many of her key investments falter over the past year and change.
She's not afraid to buy when some of her biggest losers are slipping, so it wasn't a shock to see her buying more shares of Zoom Video (ZM 1.46%), Exact Sciences (EXAS 0.41%), and Butterfly Network (BFLY 0.07%) on Tuesday. Let's see why she's building up her stakes in these three names.
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Zoom Video
Growth has slowed considerably for Zoom since dominating mindshare during the early stages of the COVID-19 crisis. Zoom posted nearly $1.1 billion in revenue, up a weaker than expected 8% from the prior year's showing. Adjusted earnings declined, but the profit exceeded Wall Street's target.
Revenue gains have decelerated sharply at Zoom in recent quarters.
- Q4 2021: 369%
- Q1 2022: 191%
- Q2 2022: 54%
- Q3 2022: 35%
- Q4 2022: 21%
- Q1 2023: 12%
- Q2 2023: 8%
The slowdown has been brutal. The current quarter apparently won't get any better. Zoom's guidance calls for flat sequential revenue, a mere 5% year-over-year increase. Zoom's strongest customers remain engaged. Its net dollar expansion rate for enterprise customers is a healthy 120%. Zoom's largest enterprise accounts -- those generating at least $100,000 in revenue over the past 12 months -- has risen a heady 37% since last year.
The positives weren't enough for the market. Shares of Zoom plummeted 17% in Tuesday's post-earnings sell-off. Wood was there to snap up the discarded shares. As hard as Zoom has tumbled since peaking last year it remains the third largest holding across all of Ark Invest assets.
Exact Sciences
It's not just Zoom retreating while the market's been rallying this summer. Exact Sciences hit a five-year low this week. Exact Sciences was a market darling for Wood in 2020, but it's been largely downhill since the stock peaked early last year.
Investors were excited about the company's Cologuard at-home colon cancer screener and CancerSEEK test for various forms of cancer. Several analysts slashed their price targets earlier this month after Exact Sciences served up an uninspiring financial update. It posted weak revenue for the second quarter, lowering its full-year guidance.
Butterfly Network
One of the smaller stocks that found its way into Wood's shopping bag on Tuesday is Butterfly Network. The maker of next-gen ultrasound devices commands a $1 billion market cap, and Ark Invest owns more than 5% of the company.
The digital health company is gaining traction with its handheld, whole-body ultrasound devices. The $19.2 million it posted in its latest quarter may seem small, but it's a 16% year-over-year increase and a 23% sequential uptick. Unlike Zoom and Exact Sciences, Butterfly Network actually exceeded Wall Street's top-line expectations. The shares moved higher following its well-received report, but Butterfly Network is still trading 81% below last year's all-time peak.
Zoom, Exact Sciences, and Butterfly Network may be out of favor right now, but they still are growth stocks worth watching. We'll have to see if Wood's penchant for sinking stocks finally starts to pay off later this year.
