Cathie Wood kicked off the this trading week with a little shopping. The co-founder, CEO, and chief stock picker of the Ark Invest family of growth-oriented exchange-traded funds publishes her daily transactions. She was busy adding to many of her existing positions.
What is Wood buying these days? She increased her stakes in Toast (TOST 0.22%), Twilio (TWLO -1.59%), and Robinhood Markets (HOOD -1.10%) on Monday. Let's take a closer look at what she might be seeing in the three stocks that all happen to be well below their all-time highs.
Toast
If you find yourself settling up more of your dining experiences with a Toast device scanning your payment, you're not alone. Toast is booming these days. There were 85,000 locations on the platform -- a point-of-sale cloud-based solution for restaurants that does a lot more than just take orders and process payments -- at the end of March, a 40% increase over the past year.
Business is growing even faster than the roll call. Revenue rose 53% to $819 million in its latest quarter, well ahead of the 43% year-over-year boost that analysts were projecting. Its annualized recurring run rate has surged 55% over the past year. Losses are a problem, but gross profit and adjusted EBITDA are improving. Analysts see the red ink decreasing until Toast turns a profit in 2026.
Image source: Getty Images.
The success that Toast is having shouldn't come as a surprise. Investing in restaurant stocks is historically risky, but Toast is a play on the players that win. The eatery business has evolved dramatically in recent years. The concepts that thrive are the ones that can serve patrons on all three fronts: dining in, take out, and through third-party delivery apps. Toast helps manage the flow of orders. It also helps tackle payroll, inventory management, and even loyalty programs.
Toast is trading for less than half of its $40 IPO price tag from two years ago, but it has raised its guidance nearly every quarter as a public company. It boosted its outlook again last week with its Q1 report. The shares moved higher after the well-received financial update, but it gave back all of those gains by the end of the week. The retreat was likely a dinner bell for Wood on Monday, being able to add to her Toast position at pre-earnings prices.
Twilio
Toast may have initially moved higher after posting better-than-expected results, but Twilio went the other way last week. Revenue growth has slowed for seven consecutive quarters, and its outlook for the current quarter calls for a 4% to 5% year-over-year increase. This is a far cry from the 67% top-line growth rate that Twilio was posting when the deceleration started nearly two years ago.
The leading provider of in-app communication solutions continues to be relevant. It can let smartphone owners know when their ridesharing driver has arrived, reset an app password in real time, or confirm a vacation rental without leaving the application. The problem is that many of its clients are going through growing pains. Its dollar-based net expansion rate has fallen to 106%, meaning that existing customers are spending just 6% more on the platform over the past year than they were a year earlier. Growth investors like to see their cloud-based platforms with an expansion rate of 120% or better.
Robinhood Markets
This should be a good time for Robinhood Markets. The next-gen trading platform that feasts on youngish options and crypto traders has seen a bounce in digital currencies, growth stocks, and market volatility. Unfortunately, the stock is still trading in the single digits.
The good news is that account values and net deposits are rising in this welcome environment. The bad news is that the audience is thinning. The 11.8 million monthly active users that Robinhood was servicing at the end of March was a slight uptick from where it was three months earlier, but it was still 26% lower than where it was a year ago and less than half of the 24.1 million active users the platform had when it peaked in May of 2021.
Toast, Twilio, and Robinhood have had their challenges, but Wood obviously continues to see them as disruptive growth stocks. She bought more of all three stocks this week, even if most investors didn't follow her lead.
