Cathie Wood's aggressive growth style of investing is fashionable again. After a rough 2021 and 2022, the Ark Invest co-founder, CEO, and chief stock picker is seeing her exchange-traded funds move higher. She isn't duplicating her blowout success of 2020, but she could be back on track after a two-year lull.
Twilio (TWLO 0.79%), Toast (TOST 3.83%), and Roku (ROKU 6.33%) are three of her active portfolio holdings that I believe could deliver healthy gains from current levels. Let's take a closer look at some of the growth stocks that could help you -- and Wood -- beat the market from here.
NYSE: TWLO
Key Data Points
Twilio
Your phone has become a game changer and a problem solver, and you can probably thank Twilio for making the device in your hand so essential. It's the leading provider of in-app communications solutions.
If you're getting real-time notifications on your ride-share driver's arrival, confirming your holiday vacation rental, or resetting your streaming service's password -- without having to exit the application itself -- there's a good chance that you have Twilio to thank. There are now more than 304,000 active customer accounts on the platform.
Twilio's growth has decelerated sharply since 2021. It has posted eight consecutive quarters of slowing year-over-year revenue gains, a run that started with 67% growth two years ago. The top-line increase clocked in at just 10% in last week's quarterly update.
The stock still moved higher following the report. It's trading higher in 2023, but is still a brutal 87% off from its all-time high set in early 2021.
Image source: Getty Images.
The good news about its latest financial performance is that 10% revenue growth is better than the 4% to 5% it was forecasting three months ago. The news is even better on the bottom line, where its adjusted profit of $0.54 a share was nearly double the $0.30 a share that analysts were targeting.
Twilio's slowing growth has been largely attributed to a slowdown in business for the industries of some of its largest customers. This is a usage-based model, so it makes sense for Twilio's fate to be tied to the success of the apps of its accounts.
Its dollar-based net expansion rate is at a record low of 103%, a number that translates into existing accounts spending 3% more on Twilio over the past year than they did in the previous 12-month period. The metric was consistently above 120% until a year ago.
With the shares well off their peak, the starting line is kind. The opportunity is there. Twilio is talking up artificial intelligence as a growth driver. Market sentiment could finally start to turn here. Now it just needs its financials to follow suit.
NYSE: TOST
Key Data Points
Toast
For better or worse, settling up at the end of a restaurant dining experience these days often finds your server coming back to the table with a Toast reader. It has become the leading next-gen solution for eateries to process payments. There are now 93,000 locations on the Toast platform after signing a record 7,500 net new adds in its latest quarter.
For a patron, Toast is a way to improve the efficiency and accuracy of an eatery transaction. For the establishment itself, the point-of-sale cloud-based platform does so much more. Toast is a one-stop-shop to survive in the new normal. It helps businesses tackle inventory control, manage third-party delivery app orders, and even create loyalty programs. In the eyes of some restaurateurs, you either have Toast or you are toast.
Business is booming. Revenue soared a better-than-expected 45% in last week's second-quarter report, even stronger than the 35% year-over-year growth in its number of locations. Toast would go on to bump its top-line guidance higher for the full year.
In a welcome surprise, it also now expects to generate positive adjusted earnings before interest, taxes, depreciation, and amortization. Offering eateries a lifeline with a full suite of business-enhancing tools is a pretty good business model, but it's still available at a little more than half of its initial public offering price of $40 from two years ago. Order up.
NASDAQ: HOOD
Key Data Points
Roku
Your living room can't get enough of Roku. Investors are starting to feel the same way. Shares of Roku have nearly doubled in 2023, but like Twilio and Toast, the stock is trading nowhere close to its 2021 peak.
Roku is the country's leading hub for streaming content on your TV. There are 73.5 million accounts on the platform, streaming an average of nearly four hours of content a day.
Unlike Twilio, revenue growth has accelerated in back-to-back quarters. Its bottom line has also improved sequentially in back-to-back reports. Roku needs the connected-TV advertising market to bounce back to pick up the pace of its recovery. It's Wood's second-largest holding across all of her portfolios despite some recent profit taking. It's time to tune into Roku.
