Cathie Wood manages several funds through her company Ark Invest that focus on innovative growth. In this space, she predicts several industries that will undergo massive transformations over the next few years.

Such industry-changing innovations have brought thousand-fold returns in stocks such as Amazon and Apple. While no company or investment analyst can promise comparable growth, investors hold tremendous potential for outsized gains with Roku (ROKU -3.09%) and Zoom Video Communications (ZM 0.09%).

Roku

Roku currently makes up about 5.6% of Cathie Wood's combined portfolios, and it has become more troubled as of late. Slowdowns in ad spending have hampered the stock.

News that it held about $487 million in cash and equivalents, about one-fourth of its liquid assets, in the troubled SVB Financial added to the uncertainty. The fact that Roku is not currently profitable makes that situation more concerning.

But amid such concerns, CEO Anthony Wood has begun to pursue more profitable plans. Active accounts for the fourth quarter came in at 70 million, an increase of nearly 10 million from year-ago levels. Moreover, Roku grew its market lead in the U.S., Canada, and Mexico. The company continues to benefit from a shift in advertising from traditional sources to streaming platforms. Such improvements may validate ARK's expected value of $605 per share price for Roku by 2026.

Nonetheless, the financials showed slowing growth in 2022. Revenue of $3.2 billion for 2022 rose by 13%, well below the 55% revenue growth in 2021. The company also reported a $498 million loss in 2022, a reversal from the $242 million profit in 2021. The 68% increase in operating expenses caused the loss, though the 24% surge in the cost of revenue was a contributing factor. Consequently, the stock is down by nearly half over the last year.

Still, the stock has risen by nearly 55% in 2023, indicating that a recovery may have begun. Its price-to-sales (P/S) ratio of less than 3 is a bargain compared to P/S ratios above 30 two years ago. As more advertising shifts to streaming, Roku stock could easily rebound as the platform's importance grows.

Zoom

Zoom, which makes up about 5.3% of ARK's holdings, may have become a household name due to the pandemic, but it is far from a flash in the pan from that era. Although most employees have returned to the office, online meetings remain a critical component in connecting with other offices and workers who continue to work offsite. Zoom also built a full-fledged communications ecosystem, adding functionality such as VoIP phone service, online webinars, and functionality for online call centers and virtual agents.

Among some analysts, the company also stands out for Cathie Wood's bold prediction, namely that Zoom stock will hit an expected value of $1,500 per share by 2026. Though she also outlined a bear case of $700 per share over the same timeframe, this is still a daring claim considering the price of less than $70 per share as of the time of this writing.

Zoom faces competition from industry heavyweights such as Cisco and Microsoft. Nonetheless, Zoom dominates the industry with a market share of about 55%.

Chart showing Zoom with the highest market share of any videoconferencing software in 2022, with 55.44%.

Image source: T3 Technology Hub.

Growth may also take some time to manifest. In fiscal 2023 (which ended Jan. 31), the revenue of $4.4 billion rose just 7% compared to the prior fiscal year. Non-GAAP net income fell to $1.3 billion from $1.6 billion in fiscal 2022. Increased spending in research and development led to a significant jump in operating expenses. 

However, that spending could easily increase revenue in the long run as Zoom improves its ecosystem. Moreover, the stock's value has started to climb more recently after a sustained, post-pandemic decline. That drop took its P/S ratio to less than 5, well under 2020 levels when it briefly exceeded 120. Such factors could set investors up for massive returns in the SaaS stock if Wood's prediction for Zoom stock comes close to becoming true.