Ark Investment Management CEO Cathie Wood's pattern of investing in innovation is a theme that dominates the various exchange-traded funds (ETFs) she manages. Many of her favorite companies have faced their fair share of market headwinds over the past year as investors have turned away from growth-oriented businesses and become increasingly risk-averse.
Although the market is still volatile, 2023 has kicked off with a series of robust market days that have sent a number of Wood's stock picks soaring. Investors should never buy or sell a stock based on share price alone, but great businesses can ultimately rise back to the top. The positive shifts investors have witnessed in many growth-facing sectors of the market lately may indicate the start of such a journey.
On that note, if you have cash to put to work right now, here are three fantastic Cathie Wood stocks with supercharged potential that could outperform the market over the long term.
1. Shopify
Shopify (SHOP 2.95%) is still trading down by about 50% from where it was a year ago, but the stock has popped by roughly 40% since the start of 2023.
In the first nine months of 2022, the company generated just shy of $4 billion in revenue, representing an increase of 20% from the same period in 2021. Shopify reported a net loss of $2.8 billion in the period, but that was still a notable decline from its net loss of $3.3 billion in the first nine months of 2021. And it shaved its net loss down to $158 million in the third quarter of 2022.
Shopify is investing heavily in its supply chain infrastructure right now, including plans to launch a new fulfillment app. The company is in the process of integrating Deliverr, which it purchased last summer, with its existing Shopify Fulfillment network to create a new-and-improved system that meets the full spectrum of merchant needs. Not only is quick and easy fulfillment key to drawing and retaining merchants, it's also essential for these merchants to capture customer dollars in a highly competitive online retail space. These moves could pay off big-time for Shopify over the next decade.
Management has also said that the company expects to return to profitability, with President Harley Finkelstein commenting in the third-quarter earnings call, "If you look over the seven years since IPO, five of those years, we've been profitable."
For risk-resilient investors, Shopify presents an opportunity to invest in the long-term trajectory of the e-commerce industry, a space in which the company remains an indomitable leader. Roughly 25% of all e-commerce sites in the U.S. alone are built on Shopify's software, while the company commands an approximate 20% share worldwide.
The tech company is looking at the long game when it comes to building out its business for future success, and investors can benefit from this growth story, too.
2. Teladoc Health
While shares of Teladoc Health (TDOC 0.76%) are down 60% over the trailing 12 months, the stock is up roughly 40% year to date. The telehealth leader seems to be bouncing back from what was without a doubt a rough first half of 2022, in which the company wrote down roughly $10 billion in impairment charges related to its 2020 acquisition of Livongo.
Even though Teladoc overpaid for this acquisition, the growth that the integration of these businesses has effected is starting to pay off. The company is seeing rapid adoption of its chronic care segment, with nearly 30% of Teladoc users now leveraging these solutions. Its mental healthcare segment, BetterHelp, is now growing so rapidly that it generated almost $1 billion in revenue in 2022.
Teladoc is also making strides on the primary care front. In the third-quarter earnings call, CEO Jason Gorevic stated that "1 in every 3 of our Primary360 members is using two or more of our services, demonstrating Primary360's role not just as virtual primary care, but also as a front door to multi-specialty care."
The adoption of virtual care services hit an all-time high during the pandemic, but the need for quality telehealth services that target a wide variety of healthcare needs is a durable one that is only expected to grow in the years ahead. Teladoc is situated at the forefront of the rapidly growing U.S. telehealth industry. The company's investments to expand its business to meet every aspect of the healthcare consumer's journey only increase its competitiveness in this space.
For long-term investors, the current discount the shares are trading at may be too good to overlook given its still tremendous untapped potential.
3. Zoom Video Communications
Zoom Video Communications (ZM 0.81%) has seen its shares fall 50% over the past year, but the stock is up 20% since the start of 2023. Even as growth has slowed from pre-pandemic heights -- which frankly seemed inevitable -- Zoom is continuing to witness strong growth in its enterprise customer business and has remained profitable. In the third quarter of 2022, Zoom reported that its enterprise customer base was up 14% from the same quarter in 2021.
Zoom also reported that its cohort of customers contributing more than $100,000 in revenue over the trailing 12 months had risen 31% on a year-over-year basis. And while revenue rose by a modest 5% year over year and net income decelerated from the year-ago period, these two metrics still totaled $1.1 billion and $48 million, respectively, in the third quarter.
Zoom is among several tech companies that announced layoffs as a means of streamlining operating costs and aligning to the current growth environment. The stock actually popped about 10% initially on the news, perhaps a sign that investors feel this move will set the company up for better growth and returns over the long haul once macro conditions improve.
Given Zoom's roughly 56% share of the video conference software market alone, the company looks to be well-positioned for a robust recovery in customer spending in the future, and the stock can easily follow this journey back to the top.
