Cathie Wood is making the most of the resurgence in growth stock investing. The CEO, founder, and chief investment officer of Ark Invest made some portfolio moves to kick off the new trading week, and she's not afraid to show her receipts.
The more interesting additions to her portfolio on Monday were UiPath (PATH -1.47%), Velo3D (VLD -2.47%), and Coinbase Global (COIN -0.34%). Let's look a closer look at why she added to the three existing portfolio positions.
UiPath
There are plenty of reasons why companies are turning to robotics and automation to get work done these days. The rising cost of human labor, hiring challenges, training learning curves, and shutdowns when too many people get sick are speeding up the migration to high-tech automated solutions. UiPath is a leading provider of enterprise software for companies looking into workforce automation.
Shares of UiPath fell sharply last year, and the 71% plummet was more than just the market losing its appetite for growth stocks lacking sustainable profitability. UiPath also didn't help its own case with slowing growth. Despite its forward-looking value proposition, companies are holding back on their automation goals in this iffy economic climate. UiPath stunned investors in the summer when it warned that revenue would rise just 12% to 13% for all of fiscal 2023. The stock that went public at $56 two years ago is now trading in the teens.
Image source: Getty Images.
UiPath got a boost in December after announcing its fiscal third-quarter results. Revenue rose a better-than-expected 19%. Annual recurring revenue jumped an encouraging 36%. Its outlook at the time for the fiscal fourth quarter that ended two weeks ago wasn't as kind. UiPath is looking for a slight decline in revenue. However, UiPath has already overcome weak guidance.
Robotics and automation will continue to play a growing role in assembly lines and other tasks that people used to complete. The more than 10,000 customers on the platform are largely satisfied, leaning even more on UiPath in the process. Its dollar-based net retention rate clocked in at 126% in its latest quarter, so returning UiPath customers are spending 26% more than they were a year earlier. Clearly, UiPath is not immune to an economic slowdown, but its long-term prospects remain bright.
Velo3D
One of Wood's most frequent purchases lately happens to be one of the smaller companies in her portfolio. Velo3D has a market cap of just $589 million, and its enterprise value is even lower given its balance sheet that's flush with cash. Ark Invest has now increased its position in Velo3D in 10 of the past 11 days.
Velo3D has a 3D printing platform for metal parts that has found its audience in the aerospace, aviation, industrial power, and oil and gas industries. Its Sapphire line of printers helps deliver mission-critical parts in-house, faster and typically cheaper than waiting for third-party solutions.
It's early in the Velo3D growth cycle. Revenue was a mere $27.4 million, but it's expected to roughly triple by the time 2022 is in the books. Velo3D was initially targeting $89 million in revenue for all of last year, but in November it warned that its top-line results would be between $75 million and $80 million for 2022 instead. Last week it boosted the range to between $80 million and $81 million, so clearly last year had a stronger burst to the finish line. The stock is up a whopping 41% since the start of Wood's shopping spree 11 trading days ago.
Coinbase Global
Stock investors enjoying this year's rally in some of last year's fallen growth stocks might not realize it, but cryptocurrencies have also stormed back into favor. Despite the collapse of several trading platforms and even some digital currencies, speculators are finding signs of encouragement while sifting through the ruins.
As the leading crypto trading exchange, Coinbase is benefiting from the healthy 2023 bounce in the market. Coinbase is up 59% this year, even though the shares have corrected since more than doubling year to date at one point.
Coinbase is naturally tethered to the whims of crypto. Revenue in its latest quarter is 74% lower than the platform's peak five quarters earlier. Profits have turned to losses. As a conservative player in this space, Coinbase has avoided many of the traps that tripped up its more speculative peers. It can't escape regulatory challenges to crypto itself, but with a cash-rich balance sheet it's prepared to weather the storm.
UiPath, Velo3D, and Coinbase are intriguing additions on Wood's shopping list on Monday. It will be interesting to see if she continues loading up on these rebounding growth stocks.
