After back-to-back years of crushing returns, Cathie Wood and the Ark Invest family of exchange-traded funds (ETFs) she runs are bouncing back in 2023. Her most popular ETF is up 5% after the first five trading days of the year. It may not seem like a lot, but Wood is beating the market for a change.
Ark Invest went shopping on Monday, adding to some of Wood's hardest-hit stocks. Adobe (ADBE -0.77%), Tesla (TSLA 4.96%), and Global-e Online (GLBE -2.15%) are three of the existing positions that she added to on Monday. Let's take a closer look.
1. Adobe
You don't need Photoshop to make Adobe look good. It is an unfiltered portrait of steady growth, recently wrapping up its eighth consecutive fiscal year of double-digit revenue growth. A healthy trickle of subscription revenue will work that kind of smoothing magic.
Image source: Getty Images.
The desktop publishing behemoth is more than just a prettier picture and PDF files. Its broad product line of digital tools include the Creative Cloud suite for online publishing, as well as a popular platform in the e-signature market.
Growth has slowed, and that's probably why it stunned investors four months ago when it agreed to a $20 billion deal for online design specialist Figma. Investors were so disappointed in the move that Adobe surrendered $35 billion in market cap in the three trading days following the news. The shares have recovered some of those losses, but shares are still below where Adobe was at the time of the Figma announcement.
However, Adobe keeps beating the drum. It has landed ahead of Wall Street profit targets every quarter over the past year. Analysts see growth slowing to 9% in the new fiscal year that started last month, but let's not be so quick to dismiss its streak of double-digit annual sales gains. It is historically undervalued by many metrics, and it's been able to weather most storms while delivering "beat and raise" reports along the way.
2. Tesla
It was a rough close to 2022 for the leader in electric vehicles. We saw Tesla discount aggressively in the U.S. last month, initially offering a $3,750 price reduction to anyone taking delivery of a new Model 3 or Model Y by the end of the year in December, increasing the incentive to $7,500 along with 10,000 miles of free charging for the final 11 days of 2022.
This desperation didn't pay off. Tesla still disappointed investors last week by announcing weaker-than-expected deliveries for the fourth quarter. Factor in what the heavy promotional activity will likely do to margins when it makes the numbers official, and it's easy to see why Tesla Motors' stock has been driving in reverse lately.
One can argue that Tesla was discounting cars last month to offset refreshed tax credits that would be rolling out in 2023, but then we learned that the tax breaks won't apply to many of the automaker's offerings. So will folks buy the cars without the $7,500 Tesla price cut now?
Throw in the second steep price cut for Tesla cars in China in the last three months -- an event that resulted in recent buyers protesting in China -- and it's a tricky situation for the company that made electric vehicles cool and viable. While Wood is getting behind the wheel, as she feels the stock is even more discounted than the cars, there will be some challenges in the next quarter or two.
3. Global-e Online
True to the phonetic nature of its name, Global-e helps companies sell to a broader audience online. Its cross-border solutions for e-commerce retailers of all sizes open the world to hometown winners.
Growth has been explosive. Revenue more than doubled in 2020, followed by an impressive 80% top-line surge in 2021. And growth is decelerating at an acceptable clip, with the top line moving 79% higher in its latest quarter. Economic uncertainties aren't helping, but they will also make companies hungrier to partner with Global-e to facilitate cross-border digital sales and fulfillment tasks.
Losses are widening, and that's naturally not a good look in this current investing climate. However, it's hard to deny the appeal of market-thumping revenue growth for a stock that shed more than two-thirds of its value last year. Global-e's price-to-sales multiple is a rich 10 on a trailing basis, but drops to a more reasonable 6.3 if we look out to this year's market forecast.
