Cathie Wood has an appetite for disruptive growth stocks on sale. The founder, CEO, and ace stock picker for Ark Invest publishes her daily transactions. She didn't do a lot of buying on Thursday, but she did add to her largest and third-largest holdings.
What did Wood buy on Thursday? She added to her existing stakes in Roku (ROKU 0.15%), Tesla (TSLA 12.06%), and Ginkgo Bioworks (DNA -2.84%) yesterday. Let's take a closer look.
1. Roku
Wood added Roku shares to a pair of her funds, supporting the streaming video pioneer that is Ark Invest's third-largest holding. Roku added nearly 10 million more users to its platform in 2022, entering 2023 with a hearty 70 million active accounts. It's the country's leading operating system for streaming, and consumers are definitely watching. Roku accounts are streaming through the platform for an average of nearly four hours a day.
Roku stock is beating the market this year, but it's still down a blistering 88% from its peak two summers ago. The two things holding Roku back are its lack of profitability and the downturn late last year of the connected TV advertising market. Roku posted its first sequential dip in average revenue per user in its latest quarter, but help could be on the way.
Image source: Getty Images.
Roku announced its new Primetime Reach Guarantee this week, wooing marketers by promising that they will reach more TV households during the primetime viewing hours than the average program airing on a top-five cable network. Roku is a free operating system, making advertising a key part of its business model.
Under the new program, an advertiser can single out a primetime date to get a marketing missive seen and heard. Roku will then prioritize delivery to unique households across its proprietary The Roku Channel as well as an additional 100 channels on its platform. Roku claims that a test of the new offering with a financial services brand during a primetime evening delivered a 15% greater household reach than the average program on a major cable network. Taking this more aggressive approach at appealing to traditional marketers as well as a financial shift to prioritize projects with a higher return on investment could help the streaming video stock get back into favor with investors.
2. Tesla
Shares of the electric vehicle maker fell nearly 10% on Wednesday after it posted poorly received financial results. The downticks were a dinner bell for Wood to add to her largest holding across her collection of exchange-traded funds.
The report was problematic, but contracting margins shouldn't have come as a surprise. Tesla is slashing prices in order to justify ramping up production of its cars, lowering its sticker prices a half-dozen times so far in 2023. There was no way that it would be able to cut enough costs to make up the difference. Tesla's gross margin clocked in at 18.3%, well below the 25% it reported in the fourth quarter.
Wood was vocal on Thursday about her bullishness on Tesla. She feels the stock could hit $2,000 by 2027, a 12-bagger in four years from current levels. A big part of her bullish thesis is Tesla's potential with robotaxis, but it's too early to start crowning victors in that arena. At least nine analysts slashed their price targets on Tesla following the report.
3. Ginkgo Bioworks
Despite recent steps back at Roku and Tesla, both stocks are crushing the market this year. It's a different story for Ginkgo Bioworks. Shares are down 25% in 2023, plunging 63% over the past year.
Ginkgo Bioworks specializes in biosecurity and biofoundry. Its biosecurity segment has relied largely on coronavirus screenings at airports and schools in recent years, and that business is understandably fading fast. The other business is the biofoundry where it helps clients design and cultivate bioengineered microorganisms at scale.
Revenue more than quadrupled in 2021 when the COVID-19 crisis was raging, and still managed to move 52% higher in 2022. Analysts see Ginkgo Bioworks' top line sliding 36% this year, before recovering in 2024. Years of losses aren't a good look, but Wood is a believer. Ark Invest now owns nearly 10% of the total shares outstanding of Ginkgo Bioworks.
