Cathie Wood did a fair amount of stock buying on Tuesday. The co-founder, CEO, and stock-picking guru of Ark Invest hasn't been an active buyer through the October rally, but she kicked off November with a pretty lengthy shopping list. Something worth noting is that many of the positions she added to happen to be companies reporting quarterly results later this week.
Is Wood trying to get in ahead of fresh financials of stocks she thinks will deliver encouraging results? She added to Twilio (TWLO -1.48%), Block (SQ -2.72%), and Roku (ROKU -3.08%) on Tuesday, three stocks that will be reporting on Wednesday or Thursday of this week. Let's see why they could bounce back.
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Twilio
Your phone can do a lot once you tap into one of the app icons. Twilio plays an important role behind the scenes. It's the top dog of in-app communication solutions. When a deliver app driver is approaching with your hoagie or when you need to reset your streaming service password without leaving the application, Twilio's providing seamless contact back and forth.
Twilio stock took a hit over the summer when it posted second-quarter results. Revenue growth of 41% was solid, but it did warn that top-line gains would decelerate to a 31% increase for the report it will serve up on Thursday. A lot of businesses have seen their fundamentals deteriorate since their summertime updates, but Twilio might fare just fine.
It's not at the mercy of the slowing ad market that has tripped up other cloud platforms. Twilio makes money based on usage, and as long as folks are firing up its client apps, Twilio will fare just fine. It did point out that some of its customers -- those behind large social networking sites, consumer-facing on-demand businesses, and crypto exchanges -- were weakening at the time, but you and I probably aren't spending less time on our favorite apps these days. Twilio's still busy, and with the stock trading 86% below last year's all-time high, it won't take a lot to impress investors this week.
Block
If Square's parent company seems to be going in circles, it could be because its stock has also cone under heavy selling pressure. Block has plummeted 80% from last summer's high-water mark. Block's Cash App continues to be popular, with 47 million transacting accounts, and merchants using Square to tackle a growing number of tasks beyond payments is helping its original namesake platform.
There are some stumbles. Block's push into crypto hasn't looked so good over the past year as digital currencies have plunged. This is important given the way that Block reports its revenue, as it saw a 6% decline in its latest quarter including crypto and a far more respectable 34% increase without the Bitcoin business.
Yes, Block will be vulnerable if the economic funk widens. Merchants won't be ringing up as many transactions, and many of them may buckle in the fiscal malaise. Block's universe is based on volume, and that will diminish up and down the ecosystem in a global recession.
One thing that's clear is that fintech stocks have been slammed hard this year. The industry is out of favor, but it will inevitably bounce back as the future of banking. With investors already discounting the Bitcoin weakness and bracing for uninspiring results, it won't take much of a report to bring back the believers.
Roku
Roku wins the crown of the pity party, down 88% from its peak. It's the leading platform for streaming TV, with 63.1 million active accounts at the end of June, a 14% increase over the past year. Total streaming hours and average revenue per user are also up, with double-digit gains over the past year.
Guidance for Wednesday afternoon's third quarter report was problematic, with Roku bracing its shareholders for a 3% year-over-year increase in revenue and an 8% sequential drop. This is an ad-supported business model. Roku is free beyond the initial dongle purchase, and entirely free for the 38% of smart TV buyers where it's the factory-installed operating system. Roku could feel the pinch of ad spend getting squeezed, but the marketers that flock to its captive audience are typically the streaming services that need to stand out more than ever ahead of an app shakeout. The bar is low. We'll find out soon if Roku can master the hurdle hopping.
Twilio, Block, and Roku are all trading well below their highs, but they're all still compelling growth stocks at attractive price points. Wood apparently believes in them right now. We'll know more about each company by the end of the week.
