Cathie Wood isn't known for being a value investor. However, the Ark Invest CEO won't pass up the opportunity to scoop up shares of innovative companies when they're available at a lower price.
That's exactly what Wood and her investment firm have been doing with one stock, in particular, in recent months. Last week, Ark Invest added $5 million worth of Pacific Biosciences of California (PACB +1.91%) (PacBio) as its steep pullback continued.
Given Wood's interest and the fact that the stock is trading at a discount, is PacBio stock a no-brainer buy right now?
Ark Invest's buying spree
By late July, PacBio's shares had skyrocketed 70% year to date. The genetic sequencing systems maker reported record first-quarter revenue in May. It began shipping the new Revio long-read sequencing system earlier in the year. The overall stock market was booming. Things were looking up.
NASDAQ: PACB
Key Data Points
However, investors' sentiment changed after PacBio reported its Q2 results and announced plans to acquire Apton Biosystems in early August. Over the next few months, the genomics stock gave up all of its previous year-to-date gains -- and then some.
Wood, though, saw an opportunity. Two of her Ark Invest exchange-traded funds (ETFs) went on a buying spree that appears to still be ongoing based on the trading activity seen last week.
Today, Wood's flagship Ark Innovation ETF (ARKK +3.53%) owns around $140 million of PacBio shares. Her Ark Genomic Revolution ETF (ARKG +2.18%) owns close to $92 million of the stock, enough to rank it as the ETF's third-largest holding.
What Cathie Wood likes about PacBio
There's a strong argument to be made that "innovative" and "disruptive" are two of Wood's favorite adjectives. Both words can be used to describe PacBio.
PacBio has been a pioneer in long-read genetic sequencing for nearly two decades. The company built up a strong intellectual property portfolio, with more than 400 U.S. patents. Since launching its first system in late 2010, PacBio sold more than 1,000 sequencers to customers in 40 countries.
Wood no doubt likes PacBio's growth prospects. The genetic sequencing market size currently totals close to $7 billion, and it's expected to roughly double by 2026. With PacBio generating revenue of $128.3 million last year, it has plenty of room to grow.
One key way that PacBio can deliver faster growth is to introduce new products. The aforementioned Revio system should play an important role in that strategy. The launch of this new sequencing system has surpassed expectations. The company has also expanded into the short-read sequencing market by starting to ship its Onco system in August.
PacBio is targeting revenue of more than $500 million by 2026. It also expects to generate positive cash flow by then.
Is PacBio stock a no-brainer buy?
Does all of this make PacBio stock a no-brainer buy? No. Lots of companies put forward ambitious financial objectives and strategic plans, but not all of them execute well enough to be successful. There's no guarantee that PacBio will be able to do so.
There's also the reality of competition in the genetic sequencing systems market. Illumina remains the 800-pound gorilla in short-read sequencing. It's also moving into the long-read sequencing market. Oxford Nanopore and Roche stand out as formidable rivals as well.
I think that risk-averse investors are better off looking elsewhere. However, more aggressive investors might want to consider buying PacBio stock. Maybe the company won't accomplish all it's set out to do. But if it even comes close, it could be a huge winner. Cathie Wood is betting heavily on that outcome.
